kdo's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/62342/comments http://seekingalpha.com/article/133309-fas-faz-dangerously-crossing-the-ultimate-pairs-trade?source=feed#comment-481445 481445 Tue, 28 Apr 2009 15:23:10 -0400 http://seekingalpha.com/article/129086-a-guide-to-hiding-toxic-assets?source=feed#comment-449545 449545 Thu, 02 Apr 2009 13:16:49 -0400 http://seekingalpha.com/article/128645-an-autopsy-of-the-glass-steagall-act?source=feed#comment-446955 446955
The reality is that the problem is one of the "shadow" banking system or "bank like entities". Glass Steagal did not have anything to do with the fact that IBs could directly securitize mortgages from mortgage brokers and sell them to institutions, hedge funds and money market funds, effectively completely bypassing the banking system. How come there is no screaming about how we needed to regulate money market funds more closely as a bank like entity, or highly leveraged institutions like GE finance? Glass Steagal did not allow GE finance to happen. Most of the bank like entities or shadow banks existed because they morphed from investment vehicles towards using short term paper to leverage returns. The world changed faster than the regulatory framework and the regulatory framework must catch up. That is not the fault of Glass-Steagal.]]> Tue, 31 Mar 2009 15:41:06 -0400
The reality is that the problem is one of the "shadow" banking system or "bank like entities". Glass Steagal did not have anything to do with the fact that IBs could directly securitize mortgages from mortgage brokers and sell them to institutions, hedge funds and money market funds, effectively completely bypassing the banking system. How come there is no screaming about how we needed to regulate money market funds more closely as a bank like entity, or highly leveraged institutions like GE finance? Glass Steagal did not allow GE finance to happen. Most of the bank like entities or shadow banks existed because they morphed from investment vehicles towards using short term paper to leverage returns. The world changed faster than the regulatory framework and the regulatory framework must catch up. That is not the fault of Glass-Steagal.]]> http://seekingalpha.com/article/128324-ten-cars-detroit-should-copy?source=feed#comment-445486 445486 Mon, 30 Mar 2009 14:28:14 -0400 http://seekingalpha.com/article/128099-what-else-are-the-banks-hiding?source=feed#comment-443750 443750 Just becauase it's securitized and "off-balance sheet" doesn't mean it will come back on. You need to look at individual basis for how that will happen. Most of it won't and the the bank is not the primary beneficiary of any of it, otherwise it already would be on the balance sheet. You need to find what out is guaranteed. It is a serious oversight to simply say there are off-balance sheet entities. It doesn't remotely encompass anything close to what the real risk is. ]]> Sat, 28 Mar 2009 23:39:35 -0400 Just becauase it's securitized and "off-balance sheet" doesn't mean it will come back on. You need to look at individual basis for how that will happen. Most of it won't and the the bank is not the primary beneficiary of any of it, otherwise it already would be on the balance sheet. You need to find what out is guaranteed. It is a serious oversight to simply say there are off-balance sheet entities. It doesn't remotely encompass anything close to what the real risk is. ]]> http://seekingalpha.com/article/127258-paying-the-aig-bonuses-the-alternative-is-worse?source=feed#comment-435483 435483 I am personally far more disturbed about the original compensation scheme given to AIGFP execs which simply gave them 30% of profits. Is it just me, or does that seem like a ridiculous compensation scheme which focuses them completely on driving whatever profit they can get, regardless of the risk which is far more relevant to the problems we have? By the time the retention bonus scheme came along, I'm pretty sure it was obvious to everyone in the division, there would be no profits for a long time within the division and the only "profit performance" that anyone would be able to measure was associated with how little can we lose? That meant, there would be very little compensation for any future work under the previous plan. If I were CEO, I would be scared they would all leave.

Unfortunately AIG is far from the only practicioner of such compensation schemes, I think there are similarities throughout all of corporate America with the use of options, which are usually exercised and sold to cash quickly when they vest, instead of restricted stock which can force executives to keep more of their wealth in stock they can't sell. Didn't help Lehman or Bear, but at least there is a certain justice that executive wealth should get creamed if they lead their company to bankruptcy, instead of sold long ago and kept safely and diversified away. Anyone who thinks that it would be easy to simply replace the AIG team in the middle of the crisis I think is just angry and not really thinking clearly. I understand the anger, I just think it's the wrong compensation scheme to be angry about. It's the first one that helped impale the company. Those types of schemes are all over corporate america and still remain.

I also agree, MER was far more egretious. But really, part of the problem is this is the outlet for the financial mess we're in of which we should all be angry. Because for the most part, I think this is about as much as the general public and both houses really understand about the crisis. The dudes didn't deserve the money. Unfortunately, I am disturbed by what I see as the general level of understanding about the big things about where we go from here from our parties/houses/leaders. So instead everyone focuses on what they understand. ]]> Sun, 22 Mar 2009 13:36:43 -0400 I am personally far more disturbed about the original compensation scheme given to AIGFP execs which simply gave them 30% of profits. Is it just me, or does that seem like a ridiculous compensation scheme which focuses them completely on driving whatever profit they can get, regardless of the risk which is far more relevant to the problems we have? By the time the retention bonus scheme came along, I'm pretty sure it was obvious to everyone in the division, there would be no profits for a long time within the division and the only "profit performance" that anyone would be able to measure was associated with how little can we lose? That meant, there would be very little compensation for any future work under the previous plan. If I were CEO, I would be scared they would all leave.

Unfortunately AIG is far from the only practicioner of such compensation schemes, I think there are similarities throughout all of corporate America with the use of options, which are usually exercised and sold to cash quickly when they vest, instead of restricted stock which can force executives to keep more of their wealth in stock they can't sell. Didn't help Lehman or Bear, but at least there is a certain justice that executive wealth should get creamed if they lead their company to bankruptcy, instead of sold long ago and kept safely and diversified away. Anyone who thinks that it would be easy to simply replace the AIG team in the middle of the crisis I think is just angry and not really thinking clearly. I understand the anger, I just think it's the wrong compensation scheme to be angry about. It's the first one that helped impale the company. Those types of schemes are all over corporate america and still remain.

I also agree, MER was far more egretious. But really, part of the problem is this is the outlet for the financial mess we're in of which we should all be angry. Because for the most part, I think this is about as much as the general public and both houses really understand about the crisis. The dudes didn't deserve the money. Unfortunately, I am disturbed by what I see as the general level of understanding about the big things about where we go from here from our parties/houses/leaders. So instead everyone focuses on what they understand. ]]> http://seekingalpha.com/article/123622-what-will-it-take-for-faith-in-financial-engineering-to-wane?source=feed#comment-411151 411151 I think part of the problem is thus. Economic models exist which show clearly that expectations of price increases, can lead to further price increases (inflation) and that can be modified through interest rates, same with deflation, which provide feedback loops. However, the knuckleheads (economists) give way too much credit towards people to price assets and don't understand that asset price behave in the exact same way. So if people become habituated to price increases, they're expectations of price increases start creating a self fulfilling prophecy (ie: I will pay more today because I expect it to be much higher next year), just like the prices of stuff. But what to do? Clearly, it should not be the provence of the government or central bank to declare what prices should be and having a stated policy of "stable asset prices" is wierd and kind of socialist. However, especially when people are taking on too much debt to buy overpriced assets, there is a huge problem brewing that needs intervention.

]]> Tue, 03 Mar 2009 11:16:56 -0500 I think part of the problem is thus. Economic models exist which show clearly that expectations of price increases, can lead to further price increases (inflation) and that can be modified through interest rates, same with deflation, which provide feedback loops. However, the knuckleheads (economists) give way too much credit towards people to price assets and don't understand that asset price behave in the exact same way. So if people become habituated to price increases, they're expectations of price increases start creating a self fulfilling prophecy (ie: I will pay more today because I expect it to be much higher next year), just like the prices of stuff. But what to do? Clearly, it should not be the provence of the government or central bank to declare what prices should be and having a stated policy of "stable asset prices" is wierd and kind of socialist. However, especially when people are taking on too much debt to buy overpriced assets, there is a huge problem brewing that needs intervention.

]]> http://seekingalpha.com/article/123135-in-response-to-ben-bernanke?source=feed#comment-405889 405889 I for one am glad he put it that way. I thought at the time we might be in a global meltdown. But everything was still working. The banks were open, the stores had lots of stuff. There were no lines or violence. The roads were full of cars. There was no evidence of a meltdown.

HAHAHAHAHAHAHAHA!!!!! I understand not many people really understood the events of October very well. But perhaps as you say that, you don't quite realize you just don't know what to look for and understand the details of what was going on as well as Bernanke did. The fact is, all that stuff *HAS* gotten enormously better. We dodged a bevy of cannon shots in October, the result of which would have been the real end of all those things that you mention says there was no problem. By the time all of those things you mention aren't working, it's far too late. I guarantee you the tsunami was in sight.]]> Fri, 27 Feb 2009 11:14:30 -0500 I for one am glad he put it that way. I thought at the time we might be in a global meltdown. But everything was still working. The banks were open, the stores had lots of stuff. There were no lines or violence. The roads were full of cars. There was no evidence of a meltdown.

HAHAHAHAHAHAHAHA!!!!! I understand not many people really understood the events of October very well. But perhaps as you say that, you don't quite realize you just don't know what to look for and understand the details of what was going on as well as Bernanke did. The fact is, all that stuff *HAS* gotten enormously better. We dodged a bevy of cannon shots in October, the result of which would have been the real end of all those things that you mention says there was no problem. By the time all of those things you mention aren't working, it's far too late. I guarantee you the tsunami was in sight.]]> http://seekingalpha.com/article/122656-jeremy-siegel-s-silly-p-e?source=feed#comment-403713 403713 BTW - I don't mean to say ownership. I mean to say when you own the S&P 500, your own implied PE is changing with every market wiggle of the individual shares down below because those wiggles change each indivual companies PE ratio. When you buy the S&P 500, that is effectively what you are buying and that is what Siegel is trying to show. So yes, the denominator is always changing as a buyer of the S&P 500.


On Feb 25 06:13 PM kdo wrote:

>
> Actually Siegel is right.
> You say:
>
> Earnings don't change according to market capitalization. The p/e
> ratio is an interesting animal: the numerator changes from day to
> day and even from second to second, while the denominator changes
> only once a quarter. It's an indicator of how the market (the numerator)
> is reacting to reality (the denominator). But under Siegel's method,
> the denominator changes every second as well. And rather than dividing
> the market by reality, we end up dividing the market by itself. Which
> is much less useful.
>
> You're ownership of those earnings is changing with every individual
> wiggle of individual shares too. You just don't know it.]]> Wed, 25 Feb 2009 18:22:15 -0500 BTW - I don't mean to say ownership. I mean to say when you own the S&P 500, your own implied PE is changing with every market wiggle of the individual shares down below because those wiggles change each indivual companies PE ratio. When you buy the S&P 500, that is effectively what you are buying and that is what Siegel is trying to show. So yes, the denominator is always changing as a buyer of the S&P 500.


On Feb 25 06:13 PM kdo wrote:

>
> Actually Siegel is right.
> You say:
>
> Earnings don't change according to market capitalization. The p/e
> ratio is an interesting animal: the numerator changes from day to
> day and even from second to second, while the denominator changes
> only once a quarter. It's an indicator of how the market (the numerator)
> is reacting to reality (the denominator). But under Siegel's method,
> the denominator changes every second as well. And rather than dividing
> the market by reality, we end up dividing the market by itself. Which
> is much less useful.
>
> You're ownership of those earnings is changing with every individual
> wiggle of individual shares too. You just don't know it.]]> http://seekingalpha.com/article/122656-jeremy-siegel-s-silly-p-e?source=feed#comment-403705 403705 Actually Siegel is right.
You say:

Earnings don't change according to market capitalization. The p/e ratio is an interesting animal: the numerator changes from day to day and even from second to second, while the denominator changes only once a quarter. It's an indicator of how the market (the numerator) is reacting to reality (the denominator). But under Siegel's method, the denominator changes every second as well. And rather than dividing the market by reality, we end up dividing the market by itself. Which is much less useful.

You're ownership of those earnings is changing with every individual wiggle of individual shares too. You just don't know it. ]]> Wed, 25 Feb 2009 18:13:40 -0500 Actually Siegel is right.
You say:

Earnings don't change according to market capitalization. The p/e ratio is an interesting animal: the numerator changes from day to day and even from second to second, while the denominator changes only once a quarter. It's an indicator of how the market (the numerator) is reacting to reality (the denominator). But under Siegel's method, the denominator changes every second as well. And rather than dividing the market by reality, we end up dividing the market by itself. Which is much less useful.

You're ownership of those earnings is changing with every individual wiggle of individual shares too. You just don't know it. ]]> http://seekingalpha.com/article/120608-are-uninsured-bank-depositors-in-danger?source=feed#comment-389192 389192 Uhhhhhhh.......

www.fdic.gov/consumers...

So yes, it is de jure (by law). Don't let that get in the way of unnecessarily fomenting panic by an influential writer/journalist on the subject by writing before researching. Kind of a serious issue, wouldn't you think? At least you wrote an update.

BTW, finding that link took me 5 minutes. Good work Felix.]]> Sun, 15 Feb 2009 10:35:09 -0500 Uhhhhhhh.......

www.fdic.gov/consumers...

So yes, it is de jure (by law). Don't let that get in the way of unnecessarily fomenting panic by an influential writer/journalist on the subject by writing before researching. Kind of a serious issue, wouldn't you think? At least you wrote an update.

BTW, finding that link took me 5 minutes. Good work Felix.]]> http://seekingalpha.com/article/117978-buy-american-the-ghost-haunting-davos?source=feed#comment-373709 373709 The overall economy of the US will *NOT* benefit by erecting barriers. The primary problem with the economy is not with trade. It is that we have an asset bubble, no savings and too much leverage from people making poor decisions about the buying of assets and the lending to people to buy assets. That has nothing to do with trade. These types of conversations cut dangerously close to throwing out the baby out of fear and populist rhetoric, instead of just dealing with the bathwater.


On Feb 02 02:53 PM Michael K wrote:

> I think the most important takeaway from this article is that deficit
> states tend to profit from protectionism. Yes, we can point fingers
> at the Great Depression all we want, but the fact is that the America
> of today is drastically different from the America of 1933. Even
> if states like China or India are strongly anti-protectionist, they
> still have no choice but to sell to America. They can't afford to
> not sell to us, while we can afford to not buy from them.
>
> Sure, there are some companies, even huge companies, that would likely
> be negatively affected, such as (seekingalpha.com/symbo...),
> but overall the economy would benefit.
>
> The question is how selfish America can be. Do we pass a stimulus
> package with Buy America provisions, thereby likely improving the
> lot of America and it's economy, or do we listen to the free trade
> folks and scratch the Buy America aspects of the stimulus, thereby
> improving the lot of the entire world, but improving the lot of America
> less.]]> Mon, 02 Feb 2009 15:30:12 -0500 The overall economy of the US will *NOT* benefit by erecting barriers. The primary problem with the economy is not with trade. It is that we have an asset bubble, no savings and too much leverage from people making poor decisions about the buying of assets and the lending to people to buy assets. That has nothing to do with trade. These types of conversations cut dangerously close to throwing out the baby out of fear and populist rhetoric, instead of just dealing with the bathwater.


On Feb 02 02:53 PM Michael K wrote:

> I think the most important takeaway from this article is that deficit
> states tend to profit from protectionism. Yes, we can point fingers
> at the Great Depression all we want, but the fact is that the America
> of today is drastically different from the America of 1933. Even
> if states like China or India are strongly anti-protectionist, they
> still have no choice but to sell to America. They can't afford to
> not sell to us, while we can afford to not buy from them.
>
> Sure, there are some companies, even huge companies, that would likely
> be negatively affected, such as (seekingalpha.com/symbo...),
> but overall the economy would benefit.
>
> The question is how selfish America can be. Do we pass a stimulus
> package with Buy America provisions, thereby likely improving the
> lot of America and it's economy, or do we listen to the free trade
> folks and scratch the Buy America aspects of the stimulus, thereby
> improving the lot of the entire world, but improving the lot of America
> less.]]> http://seekingalpha.com/article/111890-japan-101?source=feed#comment-337633 337633 Wed, 24 Dec 2008 12:38:51 -0500 http://seekingalpha.com/article/107756-profiting-from-risk-aversion?source=feed#comment-317053 317053 Sorry Geoff, my comments were actually a little more pointed towards other comments on the board. My comment was basically to point out the idea, that if there is no way to make money in options, there is also no way to make money in stocks either. A pure random walk making options impossible to make money at indicates that there is in fact zero return to stocks as well. It wasn't really meant to be a trends mantra or anything to slight your idea. I certainly am not one to claim that all prices are equal at all times. I think it's an insightful thing you've picked up on. But what I will add, is that a real trend may skew what volatility says the range of outcomes theoretically should be and what may actually happen. If the return comes on average from both being long the call and short the put, a real trend may skew where the return is coming from one that you expect "shorting the put" to one that you do not expect "long the call", because that excess volatility you are noting may be a signal of change to come, not just a volatility anomoly to be taken advantage of by selling vol.

I remember seeing some study a while back from some investment bank about running a covered call strategy. What was interesting is that the study said you should not sell the call under volatility extremes and that history shows you do better by just retaining the long position temporarily. What that would indicate is that under those extremes, you get more return on average from owning the call, than from selling the put.

You wrote: "Thoughts on Market Volatility". So you've already laid out exactly what I'm talking about in many ways.









On Nov 28 06:30 PM Geoff Considine wrote:

> To Greg Harris:
>
> Yes, being net long the call (whether you are long the stock or just
> the call) allows you to grow when the broader economy makes money.
> You don't need to believe that there are no trends--i.e. that the
> market is a pure random walk to make my case here. BUT, when market
> volatility becomes irrationally high, I will believe that the call
> value exceeds the true growth potential for certain stocks---THAT
> is my whole point. This does not detract or even bear on put-call
> parity. The long-term expected return for the S&P500 is positive
> over the long-term---but the implied vol is SO high on some stocks
> that this is priced in.]]> Sat, 29 Nov 2008 02:14:46 -0500 Sorry Geoff, my comments were actually a little more pointed towards other comments on the board. My comment was basically to point out the idea, that if there is no way to make money in options, there is also no way to make money in stocks either. A pure random walk making options impossible to make money at indicates that there is in fact zero return to stocks as well. It wasn't really meant to be a trends mantra or anything to slight your idea. I certainly am not one to claim that all prices are equal at all times. I think it's an insightful thing you've picked up on. But what I will add, is that a real trend may skew what volatility says the range of outcomes theoretically should be and what may actually happen. If the return comes on average from both being long the call and short the put, a real trend may skew where the return is coming from one that you expect "shorting the put" to one that you do not expect "long the call", because that excess volatility you are noting may be a signal of change to come, not just a volatility anomoly to be taken advantage of by selling vol.

I remember seeing some study a while back from some investment bank about running a covered call strategy. What was interesting is that the study said you should not sell the call under volatility extremes and that history shows you do better by just retaining the long position temporarily. What that would indicate is that under those extremes, you get more return on average from owning the call, than from selling the put.

You wrote: "Thoughts on Market Volatility". So you've already laid out exactly what I'm talking about in many ways.









On Nov 28 06:30 PM Geoff Considine wrote:

> To Greg Harris:
>
> Yes, being net long the call (whether you are long the stock or just
> the call) allows you to grow when the broader economy makes money.
> You don't need to believe that there are no trends--i.e. that the
> market is a pure random walk to make my case here. BUT, when market
> volatility becomes irrationally high, I will believe that the call
> value exceeds the true growth potential for certain stocks---THAT
> is my whole point. This does not detract or even bear on put-call
> parity. The long-term expected return for the S&P500 is positive
> over the long-term---but the implied vol is SO high on some stocks
> that this is priced in.]]> http://seekingalpha.com/article/107756-profiting-from-risk-aversion?source=feed#comment-315687 315687 I have a couple of comments:

1) Options are sort of theoretically a 100% zero sum game. Arguing that no money can be made on them is the equivalent of saying there are no return to stocks. The law of put-call parity gives:

+(long)Call -(short)Put + (strike/rfr for time x) = long stock.

So, a long stock position is derived from being long the call and short the put and what you can get by putting the rest of the money at the RFR. So short call, long put is synthetically the same as being short. If this was not true beyond transaction costs, it would give rise to arbitrage opportunitites. It is a zero sum game only in the sense that someone has essentially swapped with you the future value of the underlying security which is really not extraordinarily different than someone simply selling the security, sitting on cash instead and banging their head on a wall when the security goes up in value. Except in this case, if they didn't hedge their exposure to you they truly are a loser in the transaction. But many options positions are taken to hedge exposures in the first place and thus are very useful even if/when they are the loser. In the case of option dealers, they are of course hedging their underlying exposures and making their money from spreads rather than bets.

What put-call parity would suggest to me, is that if there is an underlying trend to the position (say upwards), you are likely to gain some amount of your gain from owning the call and some amount from selling the put and of course the reverse is true if the trend is down.

If we are going to claim there is no trends anywhere and that market volatility determines everything, then I suggest you look at a graph of the S&P 500 over the last 100 years. Or banks in the last one and a half. Citigroup volatility in 2007 did not predict it could come anywhere near $3/share within the next year. I am not claiming one should follow trends, the much harder thing is to identify them and understand why they will continue or break down. Sometimes the easiest thing is to simply understand why they will reverse and to prepare for the reversal. But to argue they don't exist is to put your head in the sand. The long term trend of money supply and earnings power from that money supply, is up.

In fact, I like to think about this when making any of my own positions, because the option positions are actually the components that derive the long or short position. Do I like selling the put? Do I like buying the call? Sometimes a desire to go long will suddenly find a disagreement emotionally at the idea of being short the put and realizing that I only like the call, but in fact I also may not like the price of the call, since it has to be supplmented by selling the put I don't feel comfortable selling. It has helped keep me out of trouble on occasion.

]]> Wed, 26 Nov 2008 13:35:54 -0500 I have a couple of comments:

1) Options are sort of theoretically a 100% zero sum game. Arguing that no money can be made on them is the equivalent of saying there are no return to stocks. The law of put-call parity gives:

+(long)Call -(short)Put + (strike/rfr for time x) = long stock.

So, a long stock position is derived from being long the call and short the put and what you can get by putting the rest of the money at the RFR. So short call, long put is synthetically the same as being short. If this was not true beyond transaction costs, it would give rise to arbitrage opportunitites. It is a zero sum game only in the sense that someone has essentially swapped with you the future value of the underlying security which is really not extraordinarily different than someone simply selling the security, sitting on cash instead and banging their head on a wall when the security goes up in value. Except in this case, if they didn't hedge their exposure to you they truly are a loser in the transaction. But many options positions are taken to hedge exposures in the first place and thus are very useful even if/when they are the loser. In the case of option dealers, they are of course hedging their underlying exposures and making their money from spreads rather than bets.

What put-call parity would suggest to me, is that if there is an underlying trend to the position (say upwards), you are likely to gain some amount of your gain from owning the call and some amount from selling the put and of course the reverse is true if the trend is down.

If we are going to claim there is no trends anywhere and that market volatility determines everything, then I suggest you look at a graph of the S&P 500 over the last 100 years. Or banks in the last one and a half. Citigroup volatility in 2007 did not predict it could come anywhere near $3/share within the next year. I am not claiming one should follow trends, the much harder thing is to identify them and understand why they will continue or break down. Sometimes the easiest thing is to simply understand why they will reverse and to prepare for the reversal. But to argue they don't exist is to put your head in the sand. The long term trend of money supply and earnings power from that money supply, is up.

In fact, I like to think about this when making any of my own positions, because the option positions are actually the components that derive the long or short position. Do I like selling the put? Do I like buying the call? Sometimes a desire to go long will suddenly find a disagreement emotionally at the idea of being short the put and realizing that I only like the call, but in fact I also may not like the price of the call, since it has to be supplmented by selling the put I don't feel comfortable selling. It has helped keep me out of trouble on occasion.

]]> http://seekingalpha.com/article/107420-berkshire-bond-yields-vs-cds-rates?source=feed#comment-313699 313699 Hate to point out to you dlaw, but my sample arbitrage requires nothing to happen and is a risk free arbitrage. Try reading it again. Yours requires a downgrade and increase in BRK yields which has not happened yet and is thus a guess. Mine is a true arbitrage, yours is a bet and thus not arbitrage. Someone making your bet would be much better off simply shorting the bonds, because CDS are so expensive.

btw - let's explore CDS is a "larger market". Let's imagine for a moment, that if I bought a derivative of a bond from you. We'll call it a derivative since it won't be the actual bond itself, even though it will function 100% the same as the underlying bond itself. Now, I have a notional exposure of the total position and so do you. Bonds are worth $1 million, notional exposure is $2 million, since we both have a position. Then I trade it to someone else, perhaps even you at a different rate to adjust for yield changes. Notional exposure is now $4 million over the $1 million bond equivalent and now we just have a small spread yield payment in between us. On it goes every time it's traded including anyone else who comes into the trades. It's still just a $1 milion bond. The notional exposure means more about trading activity than it does about real exposure. How big do you think the bond market or stock market would be for that matter if notional exposure multiplied by two every time it was traded and was simply added to all other "notional" value of every trade made? Bigger than GDP? So much bigger than GDP it would be ridiculous to think it has any meaning to derive from the number?

04:25 PM dlaw wrote:

> "Real, economical, pure free money." - incredible. Something about
> Warren Buffett causes people to live in a complete fantasy world.
>
>
> But the author does show exactly why the CDS are so expensive: CDS
> are not only a default aritrage, they are also a spread arbitrage.
> While there are credit spread swaps (which would be the more-precise
> way to play a spread arbitrage) apparently CDS are the larger market.
>
>
> If BRK bonds are trading at a premium to the AAA market, then CDS
> are a perfect way to play the arbitrage between BRK bonds and the
> AAA market. Since the derivatives losses seem a no-brainer to at
> least move BRK bonds down 133 bp - as the author notes - there is
> a nice, built-in cushion to the downgrade/default play.
>
> So thanks to the author. Sometimes you can learn what's right by
> reading what's wrong.]]> Mon, 24 Nov 2008 11:26:42 -0500 Hate to point out to you dlaw, but my sample arbitrage requires nothing to happen and is a risk free arbitrage. Try reading it again. Yours requires a downgrade and increase in BRK yields which has not happened yet and is thus a guess. Mine is a true arbitrage, yours is a bet and thus not arbitrage. Someone making your bet would be much better off simply shorting the bonds, because CDS are so expensive.

btw - let's explore CDS is a "larger market". Let's imagine for a moment, that if I bought a derivative of a bond from you. We'll call it a derivative since it won't be the actual bond itself, even though it will function 100% the same as the underlying bond itself. Now, I have a notional exposure of the total position and so do you. Bonds are worth $1 million, notional exposure is $2 million, since we both have a position. Then I trade it to someone else, perhaps even you at a different rate to adjust for yield changes. Notional exposure is now $4 million over the $1 million bond equivalent and now we just have a small spread yield payment in between us. On it goes every time it's traded including anyone else who comes into the trades. It's still just a $1 milion bond. The notional exposure means more about trading activity than it does about real exposure. How big do you think the bond market or stock market would be for that matter if notional exposure multiplied by two every time it was traded and was simply added to all other "notional" value of every trade made? Bigger than GDP? So much bigger than GDP it would be ridiculous to think it has any meaning to derive from the number?

04:25 PM dlaw wrote:

> "Real, economical, pure free money." - incredible. Something about
> Warren Buffett causes people to live in a complete fantasy world.
>
>
> But the author does show exactly why the CDS are so expensive: CDS
> are not only a default aritrage, they are also a spread arbitrage.
> While there are credit spread swaps (which would be the more-precise
> way to play a spread arbitrage) apparently CDS are the larger market.
>
>
> If BRK bonds are trading at a premium to the AAA market, then CDS
> are a perfect way to play the arbitrage between BRK bonds and the
> AAA market. Since the derivatives losses seem a no-brainer to at
> least move BRK bonds down 133 bp - as the author notes - there is
> a nice, built-in cushion to the downgrade/default play.
>
> So thanks to the author. Sometimes you can learn what's right by
> reading what's wrong.]]> http://seekingalpha.com/article/104079-mastercard-is-the-optimism-justified?source=feed#comment-298838 298838 Wed, 05 Nov 2008 14:14:29 -0500 http://seekingalpha.com/article/101935-protecting-your-portfolio-a-look-at-four-safe-haven-investments?source=feed#comment-290855 290855
Selling covered calls is the exact opposite trade of buying puts, it's synthetically a position of selling a put. Something to keep in mind in attempting to figure out which position you actually want. ]]> Sun, 26 Oct 2008 12:53:44 -0400
Selling covered calls is the exact opposite trade of buying puts, it's synthetically a position of selling a put. Something to keep in mind in attempting to figure out which position you actually want. ]]> http://seekingalpha.com/article/101712-p-b-vs-p-e-measuring-a-stock-s-value?source=feed#comment-289960 289960
I should buy CFC, WM, BSC, LEH, AIG, WB, FNM, FRE, etc, etc. They have a low P/B!! Whoo hoo!!

In some ways you could approach this from a reverse angle. Note who in the banking sector amongst the fallen have much higher P/B ratios as a sign of a higher chance of remaining an ongoing operating entity which will benefit from the loss of the other cacasses. ]]> Fri, 24 Oct 2008 18:49:24 -0400
I should buy CFC, WM, BSC, LEH, AIG, WB, FNM, FRE, etc, etc. They have a low P/B!! Whoo hoo!!

In some ways you could approach this from a reverse angle. Note who in the banking sector amongst the fallen have much higher P/B ratios as a sign of a higher chance of remaining an ongoing operating entity which will benefit from the loss of the other cacasses. ]]> http://seekingalpha.com/article/97381-congress-please-don-t-rush-the-bailout-plan?source=feed#comment-265133 265133 Thu, 25 Sep 2008 15:37:02 -0400 http://seekingalpha.com/article/92887-aig-and-the-lunacy-of-gaap-reporting?source=feed#comment-240320 240320 The only problem I have with this article is I wonder if there needs to be more analysis on what the actual CDOs have underlying them. The real problem with the CDOs is that they're collateralized not by straight mortgages or assets, but tranches and pools of asset backed securities in the first place. A CDO may be an overcollateralization of tranches of securities that are all about to get wiped out, because the securities that back the CDO are early in line for default. If you're collateralizing the CDO with tranches of junk, the overcollateralized super senior portion of the CDO get's wiped out too, because overcollateralization of zero is still zero, or close enough. It's the senior portions of the original AB security that will prove to be collateralized better, not the CDO and it's the double layerering of risk that is the biggest problem, IMO. Until you figure out piece by piece the loss severities on the securities underlying the CDO, it's really hard to know what's going on. That's very interesting a lot of it is vintage 2005. I have a feeling understanding AIG would take enormous amounts of time, which has been my biggest problem. Ultimately I think you're right, but it's a hard fish to fry.

I think the things I want to know regarding AIG are:
1) Is the guaranty business potentially walled off from the rest of the company if they were to just abandon it?
2) If they were to write off those securities to zero, what's their adjusted tangible book value?
3) Assuming 1, what's the value of the rest of the individual components of the company?
4) Not assuming 1, what's the rest of their exposure?

Personally, I think those questions are the root of figuring out the Margin of Safety. I'd say, assume the absolute worst and then get an idea of what's it's worth. Email me offline if you want to discuss more: gregharris_73 .. at .. yahoo dot com. I really don't have enough time to root through as much as I'd want to by myself, but I'm certainly willing to put in some work through it. ]]> Wed, 27 Aug 2008 15:08:21 -0400 The only problem I have with this article is I wonder if there needs to be more analysis on what the actual CDOs have underlying them. The real problem with the CDOs is that they're collateralized not by straight mortgages or assets, but tranches and pools of asset backed securities in the first place. A CDO may be an overcollateralization of tranches of securities that are all about to get wiped out, because the securities that back the CDO are early in line for default. If you're collateralizing the CDO with tranches of junk, the overcollateralized super senior portion of the CDO get's wiped out too, because overcollateralization of zero is still zero, or close enough. It's the senior portions of the original AB security that will prove to be collateralized better, not the CDO and it's the double layerering of risk that is the biggest problem, IMO. Until you figure out piece by piece the loss severities on the securities underlying the CDO, it's really hard to know what's going on. That's very interesting a lot of it is vintage 2005. I have a feeling understanding AIG would take enormous amounts of time, which has been my biggest problem. Ultimately I think you're right, but it's a hard fish to fry.

I think the things I want to know regarding AIG are:
1) Is the guaranty business potentially walled off from the rest of the company if they were to just abandon it?
2) If they were to write off those securities to zero, what's their adjusted tangible book value?
3) Assuming 1, what's the value of the rest of the individual components of the company?
4) Not assuming 1, what's the rest of their exposure?

Personally, I think those questions are the root of figuring out the Margin of Safety. I'd say, assume the absolute worst and then get an idea of what's it's worth. Email me offline if you want to discuss more: gregharris_73 .. at .. yahoo dot com. I really don't have enough time to root through as much as I'd want to by myself, but I'm certainly willing to put in some work through it. ]]> http://seekingalpha.com/article/92887-aig-and-the-lunacy-of-gaap-reporting?source=feed#comment-240319 240319 The only problem I have with this article is I wonder if there needs to be more analysis on what the actual CDOs have underlying them. The real problem with the CDOs is that they're collateralized not by straight mortgages or assets, but tranches and pools of asset backed securities in the first place. A CDO may be an overcollateralization of tranches of securities that are all about to get wiped out, because the securities that back the CDO are early in line for default. If you're collateralizing the CDO with tranches of junk, the overcollateralized super senior portion of the CDO get's wiped out too, because overcollateralization of zero is still zero, or close enough. It's the senior portions of the original AB security that will prove to be collateralized better, not the CDO and it's the double layerering of risk that is the biggest problem, IMO. Until you figure out piece by piece the loss severities on the securities underlying the CDO, it's really hard to know what's going on. That's very interesting a lot of it is vintage 2005. I have a feeling understanding AIG would take enormous amounts of time, which has been my biggest problem. Ultimately I think you're right, but it's a hard fish to fry.

I think the things I want to know regarding AIG are:
1) Is the guaranty business potentially walled off from the rest of the company if they were to just abandon it?
2) If they were to write off those securities to zero, what's their adjusted tangible book value?
3) Assuming 1, what's the value of the rest of the individual components of the company?
4) Not assuming 1, what's the rest of their exposure?

Personally, I think those questions are the root of figuring out the Margin of Safety. I'd say, assume the absolute worst and then get an idea of what's it's worth. Email me offline if you want to discuss more: gregharris_73 .. at .. yahoo dot com. I really don't have enough time to root through as much as I'd want to by myself, but I'm certainly willing to put in some work through it. ]]> Wed, 27 Aug 2008 15:08:21 -0400 The only problem I have with this article is I wonder if there needs to be more analysis on what the actual CDOs have underlying them. The real problem with the CDOs is that they're collateralized not by straight mortgages or assets, but tranches and pools of asset backed securities in the first place. A CDO may be an overcollateralization of tranches of securities that are all about to get wiped out, because the securities that back the CDO are early in line for default. If you're collateralizing the CDO with tranches of junk, the overcollateralized super senior portion of the CDO get's wiped out too, because overcollateralization of zero is still zero, or close enough. It's the senior portions of the original AB security that will prove to be collateralized better, not the CDO and it's the double layerering of risk that is the biggest problem, IMO. Until you figure out piece by piece the loss severities on the securities underlying the CDO, it's really hard to know what's going on. That's very interesting a lot of it is vintage 2005. I have a feeling understanding AIG would take enormous amounts of time, which has been my biggest problem. Ultimately I think you're right, but it's a hard fish to fry.

I think the things I want to know regarding AIG are:
1) Is the guaranty business potentially walled off from the rest of the company if they were to just abandon it?
2) If they were to write off those securities to zero, what's their adjusted tangible book value?
3) Assuming 1, what's the value of the rest of the individual components of the company?
4) Not assuming 1, what's the rest of their exposure?

Personally, I think those questions are the root of figuring out the Margin of Safety. I'd say, assume the absolute worst and then get an idea of what's it's worth. Email me offline if you want to discuss more: gregharris_73 .. at .. yahoo dot com. I really don't have enough time to root through as much as I'd want to by myself, but I'm certainly willing to put in some work through it. ]]> http://seekingalpha.com/article/92661-is-buffett-buying-american-express-for-berkshire-hathaway?source=feed#comment-239587 239587 Get an explanation to how those calculations are being made before you believe them. Those numbers are Economic Capital as defined by IRA in association with what they think about derivative exposures, which basically means, IMO, that if you make a market in derivatives, Economic Capital "as calculated" by IRA is completely deficient because of what they assume about is required because of notional exposure. Notional exposure can increase through time through what is essentially trading and offsetting risks, not really the addition of new positions (ie: if you sell a position to another party, your net exposure went to 0, but your notional exposure doubled). If you want transparency as to what real risk for banks are considering the economic capital needed to underlie the risks on the portfolio, then they need to disclose how exactly they come up with the numbers and I've never seen that. If they have, that's great and it should be more obvious. It seems to me that the numbers they come up with are materially different than from a regulators POV and since JPM has been one of the strongest banks through the crisis and according to IRA faces the largest risk, then either the market doesn't see the risk that IRA supposes they face, or the market disagrees with the analysis.]]> Tue, 26 Aug 2008 17:12:48 -0400 Get an explanation to how those calculations are being made before you believe them. Those numbers are Economic Capital as defined by IRA in association with what they think about derivative exposures, which basically means, IMO, that if you make a market in derivatives, Economic Capital "as calculated" by IRA is completely deficient because of what they assume about is required because of notional exposure. Notional exposure can increase through time through what is essentially trading and offsetting risks, not really the addition of new positions (ie: if you sell a position to another party, your net exposure went to 0, but your notional exposure doubled). If you want transparency as to what real risk for banks are considering the economic capital needed to underlie the risks on the portfolio, then they need to disclose how exactly they come up with the numbers and I've never seen that. If they have, that's great and it should be more obvious. It seems to me that the numbers they come up with are materially different than from a regulators POV and since JPM has been one of the strongest banks through the crisis and according to IRA faces the largest risk, then either the market doesn't see the risk that IRA supposes they face, or the market disagrees with the analysis.]]> http://seekingalpha.com/article/88098-the-true-nature-of-fan-and-fred?source=feed#comment-220497 220497 No, FNM has guaranteed $8B of subprime, of which any LTV over 80% requires collateral enhancements. They own SP as investments, which gives up a gross exposure of $52B, but there is nothing in their charter about not being able to hold securities. That is a different thing, since the egg that's being protected that the govt is scared about is the ability to hold the guarantees. So you're right. $8 billion is not a zero number, so out of a book of $2.7 Trillion of guarantees, that comes out that FNM guaranteed about .296% of it's book of business in SP. Throw in the wraps of private labels which I'll guess required enhancements and we can double that figure. .6% of their total book of business. The sluts.

I'm not defending F/F. *If* F/F go to liquidation, then all securities holdders should be wiped out so that taxpayers have the last liability. I absolutely agree with that and if you were to really pay attention, no one here has commented that they don't think taxpayers will not pay a dime. That is only your interpretation. The problem is you state things as if they've already happened combined with a lack of understanding of how F/F operate and who funds them (private money). Taxpayers have no rights over F/F liquidation since they have yet to provide a dime to F/F. If we end up guaranteeing the loans I think it should be nationalized, because that actually wipes out shareholders and allows taxpayers to make their money back from any potential liabilities they will incur. Putting taxpayers on the hook while equity holders remain intact is ridiculous. It's the facts that are the problem in this article.

btw - I am no expert on F/F, but I don't believe there is anywhere pointing to the fact that their SP exposure is held in CDOs or securities tranched up by risk. If they're simple pass-throughs, using the MER amount they sold their CDOs for is not a remotely realistic measure. The loans *ARE* collateralized, unlike some of the tranches of the CDO, which are collateralized by tranche.

The reality is, if you look at the quality of the loan guarantees in their book, it's dramatically better than what what most banks and mortgage brokers were selling.

86% was long-term, intermediate term fixed.
90% primary residence.

IMO, the problem with F/F is their capital requirements didn't prepare for the 100 year flood, even though it was very apparent that flood was coming. That's what happens if you're overreliant on statistics instead of combining that with common sense. There's quite a number of institutions out there which suffer the same flaw.]]> Fri, 01 Aug 2008 14:58:49 -0400 No, FNM has guaranteed $8B of subprime, of which any LTV over 80% requires collateral enhancements. They own SP as investments, which gives up a gross exposure of $52B, but there is nothing in their charter about not being able to hold securities. That is a different thing, since the egg that's being protected that the govt is scared about is the ability to hold the guarantees. So you're right. $8 billion is not a zero number, so out of a book of $2.7 Trillion of guarantees, that comes out that FNM guaranteed about .296% of it's book of business in SP. Throw in the wraps of private labels which I'll guess required enhancements and we can double that figure. .6% of their total book of business. The sluts.

I'm not defending F/F. *If* F/F go to liquidation, then all securities holdders should be wiped out so that taxpayers have the last liability. I absolutely agree with that and if you were to really pay attention, no one here has commented that they don't think taxpayers will not pay a dime. That is only your interpretation. The problem is you state things as if they've already happened combined with a lack of understanding of how F/F operate and who funds them (private money). Taxpayers have no rights over F/F liquidation since they have yet to provide a dime to F/F. If we end up guaranteeing the loans I think it should be nationalized, because that actually wipes out shareholders and allows taxpayers to make their money back from any potential liabilities they will incur. Putting taxpayers on the hook while equity holders remain intact is ridiculous. It's the facts that are the problem in this article.

btw - I am no expert on F/F, but I don't believe there is anywhere pointing to the fact that their SP exposure is held in CDOs or securities tranched up by risk. If they're simple pass-throughs, using the MER amount they sold their CDOs for is not a remotely realistic measure. The loans *ARE* collateralized, unlike some of the tranches of the CDO, which are collateralized by tranche.

The reality is, if you look at the quality of the loan guarantees in their book, it's dramatically better than what what most banks and mortgage brokers were selling.

86% was long-term, intermediate term fixed.
90% primary residence.

IMO, the problem with F/F is their capital requirements didn't prepare for the 100 year flood, even though it was very apparent that flood was coming. That's what happens if you're overreliant on statistics instead of combining that with common sense. There's quite a number of institutions out there which suffer the same flaw.]]> http://seekingalpha.com/article/88098-the-true-nature-of-fan-and-fred?source=feed#comment-219863 219863
Let's see the accusations:
1) FNM and FRE are headed by Skull and Bones Society members. Mr Tan says that the WSJ article in fact "showed us the inner circle of the secret "Skull and Bones" society around Fannie Mae (FNM) and Freddie Mac (FRE)".
Funny, cause I read the WSJ article too and I was pretty sure when I read it the first time there was nothing about Skull and Bones secret government running society anywhere in there!! Low and behold, checking it again, I can't find that passage he refers to.
2) Talks about these entities borrowing from the govt.
The GSEs absolutely, do not borrow money from the govt and this fact alone shows enormous disregard for facts or actually knowing what one is talking about. I think it is quite easy to dismiss the article right here because of the fundamental nature of the organization of these entities is not understood, not even remotely.

But let's go on:
3) Let's see: "Apparently Mr. Mozilo and Mr. Raines were partners, with Countrywide feeding mortgages to Fannie to make Mr. Mozilo very rich".
Again, this reeks of lack of understanding the fundamental nature of FNM and FRE. Pretty much ALL banks sold many mortgages to FNM and FRE, because that is their fundamental nature to buy and guarantee loans they are allowed to buy. Mr Mozilo did not have a special relationship in this regard. If the mortgage fit certain criteria, they bought it.
4) "Fannie was creating shaking derivatives from these mortgages to generate more profits,"
While, I'm not exactly sure what a shaking derivative is, I'm guessing Mr Tan doesn't know much about them or what kinds of derivatives FNM might be using either and derivative is just a bad scary word to use. FNM had primary issues in 2002 about it's derivative accounting, of which FNM went through a significant period of time to get results restated. I don't believe there is anyone making those accusations today and that is conflating the issue of what happened several years ago with questions about their solvency today. Details, details.
5) "Yet as studies have shown, about half of the implicit taxpayer subsidy for Fan and Fred is pocketed by shareholders and management"
-- There isn't a subsidy. Taxpayers don't fund FNM. There has been an implied guarantee as a quasi-public entity that has never been tested. That is what this is about. I have my doubts that seven basis points is all the "benefit", but whatever. That's a real study at least by people who know WTF FNM and FRE actually did and is a legit point of discussion unlike anything this article has provided.
6) "Taxpayers not only have paid so much and so dearly to support this crony capitalism of friends of Mozilo"
Well, at least Mr Tan is consistent in his lack of knowledge of the GSEs. Taxpayers haven't paid anything, which says so much about this person's knowledge of the situation surrounding the GSEs. The friends of Mozilo, was funded by Countrywide, but why not conflate various issues to confuse various things people are angry about!?
7) "This is really the beauty of quasi-private and quasi-public dual structures. Profits go to the few Skull & Bones, while losses are dumped to the whole society, and all is done in the name of "helping poor people to own houses".
I wonder if Mr Tan has thought about how well the purely private companies fared in this whole mess? The GSEs couldn't do jumbos or subprime, which are the biggest messes of all.

I have no significant love of the GSEs. The privatization of profits on the backs of an implicit guarantee of the govt is not something I'm wild about in any shape or form. But Mr Tan is not entitled to his own facts and if I ran Seeking Alpha, I'd yank the article, because it is that bad. I'm not saying it's bad because of the opinion, it's the complete lack of understanding of the entities in question.

"Better to keep your mouth closed and be thought a fool than to open it and remove all doubt".
]]> Fri, 01 Aug 2008 02:44:10 -0400
Let's see the accusations:
1) FNM and FRE are headed by Skull and Bones Society members. Mr Tan says that the WSJ article in fact "showed us the inner circle of the secret "Skull and Bones" society around Fannie Mae (FNM) and Freddie Mac (FRE)".
Funny, cause I read the WSJ article too and I was pretty sure when I read it the first time there was nothing about Skull and Bones secret government running society anywhere in there!! Low and behold, checking it again, I can't find that passage he refers to.
2) Talks about these entities borrowing from the govt.
The GSEs absolutely, do not borrow money from the govt and this fact alone shows enormous disregard for facts or actually knowing what one is talking about. I think it is quite easy to dismiss the article right here because of the fundamental nature of the organization of these entities is not understood, not even remotely.

But let's go on:
3) Let's see: "Apparently Mr. Mozilo and Mr. Raines were partners, with Countrywide feeding mortgages to Fannie to make Mr. Mozilo very rich".
Again, this reeks of lack of understanding the fundamental nature of FNM and FRE. Pretty much ALL banks sold many mortgages to FNM and FRE, because that is their fundamental nature to buy and guarantee loans they are allowed to buy. Mr Mozilo did not have a special relationship in this regard. If the mortgage fit certain criteria, they bought it.
4) "Fannie was creating shaking derivatives from these mortgages to generate more profits,"
While, I'm not exactly sure what a shaking derivative is, I'm guessing Mr Tan doesn't know much about them or what kinds of derivatives FNM might be using either and derivative is just a bad scary word to use. FNM had primary issues in 2002 about it's derivative accounting, of which FNM went through a significant period of time to get results restated. I don't believe there is anyone making those accusations today and that is conflating the issue of what happened several years ago with questions about their solvency today. Details, details.
5) "Yet as studies have shown, about half of the implicit taxpayer subsidy for Fan and Fred is pocketed by shareholders and management"
-- There isn't a subsidy. Taxpayers don't fund FNM. There has been an implied guarantee as a quasi-public entity that has never been tested. That is what this is about. I have my doubts that seven basis points is all the "benefit", but whatever. That's a real study at least by people who know WTF FNM and FRE actually did and is a legit point of discussion unlike anything this article has provided.
6) "Taxpayers not only have paid so much and so dearly to support this crony capitalism of friends of Mozilo"
Well, at least Mr Tan is consistent in his lack of knowledge of the GSEs. Taxpayers haven't paid anything, which says so much about this person's knowledge of the situation surrounding the GSEs. The friends of Mozilo, was funded by Countrywide, but why not conflate various issues to confuse various things people are angry about!?
7) "This is really the beauty of quasi-private and quasi-public dual structures. Profits go to the few Skull & Bones, while losses are dumped to the whole society, and all is done in the name of "helping poor people to own houses".
I wonder if Mr Tan has thought about how well the purely private companies fared in this whole mess? The GSEs couldn't do jumbos or subprime, which are the biggest messes of all.

I have no significant love of the GSEs. The privatization of profits on the backs of an implicit guarantee of the govt is not something I'm wild about in any shape or form. But Mr Tan is not entitled to his own facts and if I ran Seeking Alpha, I'd yank the article, because it is that bad. I'm not saying it's bad because of the opinion, it's the complete lack of understanding of the entities in question.

"Better to keep your mouth closed and be thought a fool than to open it and remove all doubt".
]]> http://seekingalpha.com/article/78235-bank-of-america-better-than-treasuries?source=feed#comment-172877 172877
]]> Fri, 23 May 2008 16:35:51 -0400
]]> http://seekingalpha.com/article/74132-show-me-the-money-what-i-want-to-hear-from-starbucks?source=feed#comment-157754 157754 1) Lease rates are operating leases. Not a capital expense -- is an operating expense. Improvements are capital expenses and those won't change and the real estate problems -- so far, have been housing, not commercial. SBUX can't make estimates on what hasn't happened yet.

From the Same Press Release you call a 10-K, of which I know, because you're quoted section isn't found anywhere in the 10-K:

"The company has adjusted its new store opening target to approximately 2,500 net new stores on a global basis in fiscal 2008; approximately 900 company-operated locations and 700 licensed locations in the U.S., and approximately 300 company-operated stores and 600 licensed stores in international markets;

That is around 1200 company operated stores, which is equivalent to almost $800 million at the $655k rate you suggest, which is within spitting distance of that $880 million figure you have and can be needed/used for various reasons. ]]> Mon, 28 Apr 2008 02:16:18 -0400 1) Lease rates are operating leases. Not a capital expense -- is an operating expense. Improvements are capital expenses and those won't change and the real estate problems -- so far, have been housing, not commercial. SBUX can't make estimates on what hasn't happened yet.

From the Same Press Release you call a 10-K, of which I know, because you're quoted section isn't found anywhere in the 10-K:

"The company has adjusted its new store opening target to approximately 2,500 net new stores on a global basis in fiscal 2008; approximately 900 company-operated locations and 700 licensed locations in the U.S., and approximately 300 company-operated stores and 600 licensed stores in international markets;

That is around 1200 company operated stores, which is equivalent to almost $800 million at the $655k rate you suggest, which is within spitting distance of that $880 million figure you have and can be needed/used for various reasons. ]]> http://seekingalpha.com/article/62432-two-billionaires-concur-sell-the-banks?source=feed#comment-113874 113874 Thu, 31 Jan 2008 14:07:58 -0500 http://seekingalpha.com/article/60093-estimating-the-risk-in-citigroup-stock-and-bonds?source=feed#comment-110347 110347 Mon, 14 Jan 2008 17:19:01 -0500 http://seekingalpha.com/article/56624-wells-fargo-can-hack-its-writedowns-can-citi-and-jpmorgan?source=feed#comment-104535 104535 Fri, 07 Dec 2007 18:20:30 -0500