najdorf

Total Rating:
+3 / -1

75 Comments

    • Wed Nov 19th 19:13 PM | Rating: +1 0
      Commented on:
      GE: Not-So-Good Things Come to Light
      GE has some covenants requiring them to support GE Capital from the industrial side of the business, but none of these are worded very strongly, and there's a reason that substantially all of the debt is in GE Capital - they didn't set up the corporate structure that way just because they thought it was cute. There's no reason for it except that some wise manager back in the day thought "Worst-case scenario: we dump the Capital unit into bankruptcy or sell it off cheaply and get back to making lightbulbs". Maybe it also allows some balance-sheet games, but the SHtF scenario is the main point.
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    • Wed Nov 19th 19:06 PM | Rating: +1 0
      Commented on:
      My Reconsideration: Why Share Buybacks Are Pointless
      You're all over-simplifying and treating your passing thoughts as firm realities. Like most ideas, buybacks aren't all good or all bad.

      Since everyone pretty much agrees on liking dividends, lets think about what effect buybacks have on dividends. If a company paying a $2.00 per year dividend buys back and cancels 10 million shares, they now have $20 million in cash that they don't have to pay out (the dividends for the bought-back shares). What will they do with this money? Hmm, maybe a dividend increase?

      Of course, some companies don't do that. Some use the $20 million for a more lush executive compensation package and then watch the exec fly the plane into the mountain. These companies misused buybacks.

      But what's wrong with a company that buys back shares when shares are unreasonably cheap and only raises dividends with the increased EPS when shares are expensive? The buyback helps to make stock prices more accurate and buoyant, pulls concentrated ownership from speculative weak hands to buy-and-holders, avoids taxes, and provides a more beneficial use for capital than speculative acquisitions or foolish expansions. Even as a yield-driven investor, you want your asset value to be high because you don't pay taxes on asset level and it's always better to have higher asset levels than lower - everything will be sold some day.

      Buybacks aren't a panacea because most stocks are often overvalued, especially at those times when management has enough cash on hand to consider buybacks (cyclical tops, usually). Many managements would do better to immediately give shareholders money to invest elsewhere. But if you don't trust the management to invest your money profitably and would prefer a special dividend, why don't you give yourself a special dividend by selling your shares and investing your money elsewhere? The mass of averagish managements in average companies would do better to hold more cash and use it for buybacks and acquisitions when irrational pessimism makes everything cheap. Excellent managements in an excellent businesses should be investing everything back into the business all the time so long as ROIC matches or exceeds alternatives available to shareholders. Buybacks are a way to do this when expansion isn't practical.
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    • Wed Nov 19th 18:49 PM | Rating: +1 -1
      Commented on:
      Will Berkshire Lose Its Triple-A?
      You're both wrong: GS/GE are Berkshire investments and they can erode the book value (we won't know officially until the next Q, of course). Preferred shares have to be marked-to-market and in this case we would have to calculate a market value by comparing the cashflow and risks to other similar products, such as other forms of GS/GE equity or debt. Given that prices have declined sharply for both and the warrants are now way out of the money, one could see justification for discounting BRK's book value. Furthermore, erosions in WFC/AXP/etc. will clearly and directly reduce book value.

      Not saying I think BRK is going down, just pointing out that all investments at a company like BRK should be marked to market and that the value of future cash flows from an investment should be based on credit risk/cost of capital for the company in which one invests.
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    • Wed Nov 5th 09:29 AM | Rating: 0 0
      Commented on:
      Where Have All the Peak Oil Believers Gone?
      Just want to point out that there's more to the price of gas than the price of oil, since an early commenter apparently hadn't realized this fact. There are refining and transportation costs as well as highly varied tax rates in different parts of the world and states of the U.S.

      No one on this message board knows whether we have 30 years, 100 years or 200 years of oil - the point that you can't dispute is that we have a finite amount of oil, and we're starting to get to where we can see the limits and we have to recover a lot of the reserves that are inconvenient, expensive, or challenging to recover. Smart people would be looking at other energy sources. Idiots imagine infinite oil.
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    • Wed Nov 5th 09:08 AM | Rating: 0 0
      Commented on:
      Why Is the YouTube User Experience So Poor?
      I think Youtube is wildly variable depending on time of day/internet traffic/your system/your connection. Some days I can't get videos to load at all, some days it's instant, and it's sometimes correlated with a generally slow internet connection for me and sometimes not. I find the quality pretty decent for a free service.
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    • Fri Oct 17th 20:48 PM | Rating: 0 0
      Commented on:
      AIG: How It Spent Your Tax Money
      You guys are looking the wrong way by blaming short sellers and CDS buyers. Blame the CDS sellers and the management of companies that failed. If Lehman was sold off unjustly, they would have been able to demonstrate convincingly that their stock was undervalued - disclose the portfolio, find some buyers for good quality assets to raise capital, and show us the cash flows that justify their valuations for various securities they hold. If AIG got taken for a ride selling cheap CDS, maybe they should have done better DD on their CDS pricing and risk-management. You can't name one healthy company in history that was done in by false rumors or market manipulation. If AIG sold insurance, and AIG has money available to pay it (thanks to the gov loan, which is arguable), they must pay. They entered the transaction freely and profited at the front end. Time to pay the piper.
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    • Sat Oct 4th 22:42 PM | Rating: 0 0
      Commented on:
      Apple: Though Tempted, I Wouldn't Bite Just Yet
      Maybe some of you are younger than me and don't remember the bad days of Apple, or maybe some of you are older and only started seeing tech stocks as serious businesses after the tech crash established reasonable valuations. In any case, I think a lot of people ignore one of the biggest factors holding AAPL stock down, which is that those who predicted the continued domination of Windows machines have been right for the last 20 years. My first computer was an Apple II GS, but you have to admit that Apple didn't do a very good job of marketing and price competition in the following years. Now, I agree with most of you that AAPL is great at these prices (though I have to laugh at anyone who bought it above $150). But when you talk about Apple's growing market share, cool brand image, etc. to a general audience of potential American stockbuyers, you're talking to a lot of people who successfully ignored Apple throughout the late 80s and all of the 90s, who have been pestered by Mac users for 20 years, and who don't really find overpriced gadgets cool.

      You're talking about a company that's really a consumer company for those who want the latest and hottest: any Apple product has much cheaper competition that does the same essential functions (admittedly without so many cool features, attractive design, and brand image - but in tough times price and function come first). Do you really think that consumers will be able to afford the price premium in the environment of the next few years? I'm not talking about dedicated Mac users; I'm talking about the marginal Apple product buyer who fuels growth. In the long run Apple is almost certainly worth more than today's price (like almost every stock), but a really bad earnings announcement could be painful for a company that has so many excited momentum-driven investors. The price decline is marking both the general market problems and the particular risk for Apple of that possibility.
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    • Tue Sep 30th 09:07 AM | Rating: 0 0
      Commented on:
      Not Likely to Be a Merry Xmas for Microsoft - RBC
      The thing that's particularly funny about this sort of precise revenue/earnings prediction is that if you look back at the historical record most analysts aren't even close. Many of them just repeat company guidance or project past patterns into the future along with some made-up macroeconomic assessment. When they deviate from company guidance/historical trends, they don't typically improve the quality of predictions. When things go badly they tend to pile on negativity AFTER share prices decline. When a company develops something really great, they tend to pile on positively AFTER share prices rise. Look back at analyst reports on AAPL - "it sucks, it sucks, no one buys Macs..."; "OMG AAPL IS THE BEST EVAR BUY BUY BUY MAC IPOD IPHONE AAAAAHHH!!!"; "OMG AAPL is too expensive and no one will ever buy a Mac - sell it!" I doubt following any set of analyst recommendations on AAPL would beat buying and holding or buying in at a predetermined low point and selling at a predetermined high point.

      No one knows better than people inside the company how much money the company will report in earnings in the next quarter. Given how strongly the market punishes earnings misses or revelations of accounting irregularities, companies have a pretty strong motivation to be accurate. They also release a huge amount of information quarterly. So what's the function of analysts?

      All we really need for analysis is people on the short-side looking for companies that give misleading guidance, fudge the accounting, or commit fraud, shorting them, and publicizing their findings. Einhorn is worth 1000 "analysts" who upgrade and downgrade for foolish reasons. If a full report from the company doesn't tell you whether you want to invest, how is a layer of superficial analysis from some guy outside the company with no stake going to tell you?

      All that's happening with MSFT is that multiples are compressing as it becomes a value stock rather than a growth stock. However, the company still has growth prospects (online, business software, gaming), and if you combine these with the excellent balance sheet, cash-flow, and shareholder focus (buybacks and dividends), the company probably will be worth more than today's price in the future. The only real risk is Ballmer pulling extremely stupid acquisitions, which I suppose is a significant risk, but no investment is perfect.
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    • Sat Sep 27th 15:28 PM | Rating: 0 0
      Commented on:
      Fannie and Freddie: Finally a Light at the End of the Tunnel?
      The government did not entirely take over FNM and FRE. They are in conservatorship and the government controls a large stake in the companies (i.e. the existing common shareholders got massively diluted).
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    • Sat Sep 27th 15:09 PM | Rating: 0 0
      Commented on:
      Time Not for a Bailout, But for Nationalization
      Two questions for know-nothing troll:

      How do you know how much skin the author has in free market enterprises?

      What ideas in this post are more theoretical or less practical than the Paulson plan or the House Republican plan?

      The post provides concrete recommendations and you flip out because there are books behind the author in his picture. It's ok - avoid all educational institutions and keep voting for politicians who are as dumb as you are. Count yourself lucky that W. appointed people with records of success in business and academic endeavours (Paulson and Bernanke) to bludgeon the politicians into fixing the problem. At least he's smart enough to know that Treasury and the Fed are more significant to his way of life than FEMA and the Department of Education.
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    • Sun Sep 21st 14:53 PM | Rating: 0 0
      Commented on:
      We've Crossed the Line from Capitalism to Socialism
      Cara Ellison: Are you really taking the position of an Enron defender in 2008? The company went bankrupt and top executives were convicted of fraud. You're going to need to do a little better than "there was a very deliberate business purpose": what was it? Also, if Skilling was in the business of "[trying] to get people to see Enron for what it was", please explain why he committed fraud, resigned just ahead of bankruptcy, and dumped his stock for personal gain.
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    • Sat Sep 20th 19:32 PM | Rating: 0 0
      Commented on:
      The Artificial Inflation of Stock Prices, Due to the Short Selling Ban
      Mikebrah/studdy: Do you guys really think that on Monday you can trade profitably on information that makes front-page newspaper headlines all over the world on Friday and the weekend? The news of the last few days was a huge boon for anyone who was long financials before Thursday. Further news will create further rallies or a renewed downward slide. But the old news is in the prices: GS up 20% on Friday, BAC up 22% to mid-March levels, WFC and USB at 52-week highs, CATY having touched back over 30 (a personal interest of mine).

      3Q earnings are going to be disastrous for some companies, what with writedowns from exposure to FNM/FRE/LEH/AIG, new marks on assets based on continued housing price declines and cheap distressed sales, high costs of capital, and the freeze-up of a lot of financial business. While people may look forward to good earnings next year, at least some of the currently high prices could get knocked down in short order as people fear for the near-term earnings and take trading profits.
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    • Thu Sep 18th 00:55 AM | Rating: 0 0
      Commented on:
      Morgan Stanley in the Crosshairs
      Goldman's: Do you have any evidence whatsoever? No? Ok.

      I don't know why it's so hard for all of you to understand that shorts don't drive stable, profitable companies into bankruptcy. There's a huge amount of competition in the markets, and you don't find a lot of dollar bills that only cost 50 cents because people tend to snap those up. If shorts drive a stock down to half its true value, there are tons of value investors looking to buy that stock. If the company has articulate management with some capital to deploy, they can buy back shares or make a few insider purchases, then try to make shares scarce so that shorts can cover. Ultimately you get a squeeze and the share price rebounds back to where it ought to be.

      What shorts do is hasten the end of companies that are limping along, that can't make any credible presentation to investors regarding solvency and profitability, that can't afford to buy back any shares, that no value investor will touch.

      Naked shorting should be illegal because it makes no sense (selling something you don't have - take it to the options market, not the stock exchange). Now that it's taken care of, please stop obsessing over the non-existent problem of conventional shorting.
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    • Sun Sep 7th 16:20 PM | Rating: 0 0
      Commented on:
      What Will Fannie / Freddie Mean for Monday?
      daytrading: Bondholders are not equityholders. They are debtholders. If FNM/FRE did not make good on their debt it would be a default and lead to bankruptcy. Then you'd have problems with CDSs, other countries' relations with the US, bank solvency, massive damage to bond funds, etc. Anybody still holding the common today is a speculator and deserves what they get. The same is not true of debtholders - FNM and FRE debt has been second only to Treasury debt for a long time and it's a much more significant issue than the price of the stock.

      While we're at it, in order to understand the impact on banks we have to look at:

      a. how much preferred and common stock they hold (though any bank still holding FNM or FRE common should also be taken over by the government, as they have failed risk management) - this will be way down tomorrow.
      b. how much FNM and FRE debt they hold - this will be way up tomorrow and is a significantly larger pot than the above pot.
      c. how this affects bank's access to capital and ability to securitize mortages (complicated, may take some time to figure out).
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    • Sat Sep 6th 12:39 PM | Rating: 0 0
      Commented on:
      Fannie, Freddie Headed for Conservatorship
      palsboss: What on earth are you talking about? 2006 wasn't a high for many stocks, but even still, who is close to their high 2006 share price? Not BAC, WFC, C, WB, or any other major retail bank. Not LEH, MER, or any other major investment bank (GS is close, but they're down significantly from 2007 levels). FNM, FRE: still way down of course. AIG: hurting. Believe me, no one is ignoring the fact that the financial sector is in a hole. The rallies of the last few months have been anticipations of recovery a year or two down the line. If you're looking for maximum profits, you can't wait until everything looks sunny to buy.

      Anyone investing and following the news has been anticipating a FNM/FRE bailout for a while now. The possible negative effects and the other problems in financial companies were already reflected in the low prices. Financials rose on the news because the markets prefer certainty and the bailout sounds like a relatively measured and well-planned effort rather than a midday "Oh noes!!! FNM and FRE are worth nothing!!!" announcement. Even still financial prices are very low, and more institutions will fail. Investors are buying because companies that don't fail will be worth significantly more in the future.
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