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hayekvonfriedman

hayekvonfriedman
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  • How Do You Know When You've Found 'Alpha'? [View article]
    Thoughtful and encouraging. Thank you. I too remember Bob Brinker and he steered me as well for a good part of the '90s. Thanks again for the review of the process of thinking in terms of critical mass.
    Dec 30 06:56 PM | Likes Like |Link to Comment
  • Report: $11B now the amount in JPMorgan national settlement [View news story]
    If JPM is has "lost a ton of money" is that mass measured in $100 bills, $1 bills, or pennies and I formally request that I lose a scale factored like sum!
    The "London Whale" was prop trading and cost taxpayers nothing. ," JPMorgan Chase reported second-quarter 2012 net income of $5 billion on revenue of $22.9 billion, net of the trading loss in London. This was down from $5.4 billion in the second quarter of 2011 but not fiasco.
    The cruncher is the government and its unelected de facto legislative, executive, and judicial branches rolled into a single regulatory agency. America's biggest bank, JP Morgan, made a loss in the third quarter of 2013 after legal expenses of $9.2bn (£5.8bn) caused by a wave of regulatory investigations and potential lawsuits.
    Those of you who believe that government is the solution and not the biggest dirty player in the American economic landscape had best recall the evolutionary genesis of this tale of "corporate greed."

    The chief executives of the country's nine largest banks had no choice but to accept capital infusions from the Treasury Department in October, government documents released Wednesday have confirmed. Documents obtained and released by Judicial Watch, a nonpartisan educational foundation, the documents reveal "talking points" used by then-Treasury Secretary Henry Paulson during the Oct. 13 meeting between federal officials and the executives that stressed the investments would be required "in any circumstance," whether the banks found them appealing or not.

    Paulson also told the bankers it would not be prudent to opt out of the program because doing so "would leave you vulnerable and exposed."
    It's no secret that some of the banks had to be pressured to participate, with several CEOs saying they had been strongly encouraged to take the funds. But the documents are the first proof of the government's insistence.
    "These documents show our government exercising unrestrained power over the private sector," Judicial Watch president Tom Fitton said in a statement.

    Paulson's spokeswoman, Michele Davis, who was a top aide when Paulson was at Treasury, yesterday said, "Secretary Paulson was not one to read talking points at meetings."

    Treasury Secretary Timothy Geithner's office did not respond to requests for comment.

    The outcome of that fateful meeting - it resulted in the government taking direct stakes in the banks through $125 billion in preferred stock purchases - marked a shift in the government's strategy to fixing the financial system.


    FORTUNE -- In another sign of the huge changes within the banking business since the financial crisis, Wells Fargo (WFC) is on pace to make more money this year than any other bank in the U.S.
    Analysts expect the San Francisco-based bank to make $20.8 billion for 2013. That's more than Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS) are expected to earn combined this year. And it's $3.5 billion more than Wells' closest profit rival, JPMorgan Chase (JPM), which had held the largest profit title for three years in a row.
    But JPMorgan's legal woes have cleared the road for the Wells Fargo wagon to take the lead in the profit race. JPMorgan is in the process of negotiating a $13 billion settlement with regulators related to the bank's mortgage business. http://bit.ly/1cgUtNS
    Dec 20 08:39 AM | Likes Like |Link to Comment
  • Why It's A Mistake To Hold Cash In This Market [View article]
    It is a strategy that I use sparingly for the reasons you stated. If not exercised they generate healthy returns on cash.
    Dec 16 12:48 PM | Likes Like |Link to Comment
  • Why It's A Mistake To Hold Cash In This Market [View article]
    Those who don't study the history of the markets, or who claim to study but don't think through the various causative factors, or at least the similarities between the times leading up to them will probably not learn the hard way, because learning comes hard for them.
    Dec 15 11:14 PM | Likes Like |Link to Comment
  • Why It's A Mistake To Hold Cash In This Market [View article]
    Excellent insight.
    Dec 15 11:10 PM | Likes Like |Link to Comment
  • Why It's A Mistake To Hold Cash In This Market [View article]
    It is not as complex as the author makes it out to be and does make one wonder if verbosity is substituted for clairty
    Dec 15 11:08 PM | 1 Like Like |Link to Comment
  • Why It's A Mistake To Hold Cash In This Market [View article]
    Dollar Cost Averaging and DRIP investing are but a form of second derivative market timing and have the disadvantage of mindless reinvesting in companies while ignoring their current valuations and investment potential.
    Any disciplined approach will produce better results than ad hoc incursions into no-man's land.Their value is in the forcing one to invest regardless of market conditions, but therein also lies their Achilles heel.
    Dec 15 11:06 PM | 1 Like Like |Link to Comment
  • Why It's A Mistake To Hold Cash In This Market [View article]
    Protective puts are a better idea than stop-losses, but there is on perfect hedge except in academic texts. But to not provide some degree of ballast in case of a market "correction" and one that could last for years and be secular rather than cyclical is prudent and what separates the professionals, and yes they are better than the retail investitor at portfolio management, from star struck shoe shine
    boys
    Dec 15 11:01 PM | Likes Like |Link to Comment
  • Why It's A Mistake To Hold Cash In This Market [View article]
    Many stocks go down for a reason and many stocks stay down. Make your own decisions. Read many different perspectives including refereed financial journal articles and take all of them with a grain of salt as their authors however altruistic they believe their motivation, inevitably skew the analysis of their findings toward pre-conceived conclusions.
    Dec 15 10:42 PM | 1 Like Like |Link to Comment
  • Why It's A Mistake To Hold Cash In This Market [View article]
    Few have the ability to make sweetheart deals such as BRK's deal(forced on BAC by Paulson) to save BAC. Buffett received some special preferred shares, as well as warrants to purchase B of A common shares. These warrants are redeemable at any time until 2021, allowing Berkshire to purchase 700 million shares of Bank of America at around $7.14 a share.

    What I found interesting, and must have missed when the deal was announced almost two years ago, is that the preferred stock received by Berkshire is cumulative, meaning that if the dividend does not get paid for some reason, the amount continues to accrue until all past-due dividends are paid. By receiving these shares, Buffett ensured that Berkshire would be covered should Bank of America's performance suffer dramatically.

    Pretty shrewd move if you ask me. Indeed a sweetheart deal, but a deal that Buffett received is truly a deal ordinary investors will never see.
    So it behooves the average retail investor to cease the pursuit of Buffet like investments, which is not the same as ignoring hIS Mr. Market homilies which actually do imply market timing as the bow in a buy value quiver.
    Dec 15 10:34 PM | 1 Like Like |Link to Comment
  • Why It's A Mistake To Hold Cash In This Market [View article]
    Re-heated Buffett worship. Why not read him directly and cut out the middleman. There are many different ways to invest, but they all inherently require an asset allocation decision. How one defines the various asset classes may be of personal choice, albeit standard definitions facilitate the analysis phase, but to opine that one should never hold cash is pure nonsense on so many levels.
    Dec 14 06:22 PM | Likes Like |Link to Comment
  • Backtesting Value Investing Over The Last 10 Years: What Worked... And What Didn't [View article]
    Chris:
    Again thought provoking research. That you take the time to share it with us is laudable.
    Have you looked at the concept of Economic Value Added ("EVA") as it adds a free-cash flow perspective to that of GAAP earnings?
    If so what are your thoughts of its value added as a metric?
    EVA's big innovation is imposing a charge for all the capital that companies deploy to generate profits. Am I correct that "We narrow our return analysis primarily to shareholders' equity because both we and our clients are equity investors" you are not overly concerned with WACC as a hurdle rate? My question is non-normative, merely interrogatory.
    Similar to "Bonini's Paradox." referred to herein above and Occam's Razor, the calculations that are employed by the users of the Stern-Stewart model to arrive at adjusted NOPAT are tedious, and seem inconsistently applied by practitioners, and make the concept less robust.
    A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".)

    The formula for calculating EVA is as follows:
    EVA = Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)
    If you have any knowledge or experience with EVA, can the use of free cash flow and routine WACC be used to derive findings that are usable?
    Dec 1 04:57 PM | Likes Like |Link to Comment
  • Backtesting Value Investing Over The Last 10 Years: What Worked... And What Didn't [View article]
    Yes, some of the best. The article is thought provoking: not insulting our intelligence and investing knowledge, but not overly academic and pompous.
    Nov 30 05:19 PM | Likes Like |Link to Comment
  • Backtesting Value Investing Over The Last 10 Years: What Worked... And What Didn't [View article]
    Tom, is is possible that your switch to dividend growth from value investing was a delayed but predictable response to a changing market and that we all must be aware of secular change that must be reckoned with. If so, there are many that are of the opinion, that the dividend investing theme may have run its course. Whether it has or not only time will tell, but this is a consideration and as such the investing thesis should weight that probability.
    Also, there is a case that dividend investing is but a sub-category of value investing. So you again, may have responded to the SWOT of the extant investable world?
    Regardless, this and your work, Tom, are some of the best on SA.
    Nov 30 05:17 PM | Likes Like |Link to Comment
  • What George Bailey Can Teach Us About QE [View article]
    2 comments:
    1) "but fail to step back and consider the counterfactual of what would have happened in their absence." Who can know what would have happened if and but for QE. In the absence of empirical evidence, VAR notwithstanding, the probability of positive effects of not doing something is 0.50.
    2) The law of diminishing returns has not been suspended and indeed is being validated by successive QEs as evidenced by numerous non-cherry picked macro-economic metrics.
    Oct 2 08:48 PM | Likes Like |Link to Comment
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