I read this email a couple of days ago (as I am sure many of you have) and was not going to post it but after getting picked up by Reuters I decided to post it for anyone who hasn't seen it. I found it hilarious and it made my day. The reason is because it is so true. The much maligned female was saying what everyone knows and no one says. She was verbalizing the words of the game. The short amount of time in NYC or I saw it very often. In my opinion it is a sad game which is why I am happy in Texas (it is played in Dallas also) but it is the game. I commend Ms. 432279810 for saying what everyone knows but no one says.
http://www.reuters.com/article/internetNews/idUSN0941966120071009
The Original Post
What am I doing wrong?
Okay, I'm tired of beating around the bush. I'm a beautiful (spectacularly beautiful) 25 year old girl. I'm articulate and classy. I'm not from New York. I'm looking to get married to a guy who makes at least half a million a year. I know how that sounds, but keep in mind that a million a year is middle class in New York City, so I don't think I'm overreaching at all.
Are there any guys who make 500K or more on this board? Any wives? Could you send me some tips? I dated a business man who makes average around 200 - 250. But that's where I seem to hit a roadblock. 250,000 won't get me to central park west. I know a woman in my yoga class who was married to an investment banker and lives in Tribeca, and she's not as pretty as I am, nor is she a great genius. So what is she doing right? How do I get to her level?
Here are my questions specifically:
- Where do you single rich men hang out? Give me specifics- bars,restaurants, gyms
-What are you looking for in a mate? Be honest guys, you won't hurt my feelings-Is there an age range I should be targeting (I'm 25)?
- Why are some of the women living lavish lifestyles on the upper east side so plain? I've seen really 'plain jane' boring types who have nothing to offer married to incredibly wealthy guys. I've seen drop dead gorgeous girls in singles bars in the east village. What's the story there?
- Jobs I should look out for? Everyone knows
- lawyer, investment banker, doctor. How much do those guys really make? And where do they hang out? Where do the hedge fund guys hang out?- How you decide marriage vs. just a girlfriend? I am looking for MARRIAGE ONLY Please hold your insults
- I'm putting myself out there in an honest way. Most beautiful women are superficial; at least I'm being up front about it. I wouldn't be searching for these kind of guys if I wasn't able to match them
- in looks, culture, sophistication, and keeping a nice home and hearth.
it's NOT ok to contact this poster with services or other commercial interests
PostingID: 432279810
THE ANSWER
Dear Pers-431649184:
I read your posting with great interest and have thought meaningfully about your dilemma. I offer the following analysis of your predicament. Firstly, I'm not wasting your time, I qualify as a guy who fits your bill; that is I make more than $500K per year. That said here's how I see it.
Your offer, from the prospective of a guy like me, is plain and simple a crappy business deal. Here's why. Cutting through all the B.S., what you suggest is a simple trade: you bring your looks to the party and I bring my money. Fine, simple. But here's the rub, your looks will fade and my money will likely continue into perpetuity...in fact, it is very likely that my income increases but it is an absolute certainty that you won't be getting any more beautiful!
So, in economic terms you are a depreciating asset and I am an earning asset. Not only are you a depreciating asset, your depreciation accelerates! Let me explain, you're 25 now and will likely stay pretty hot for the next 5 years, but less so each year. Then the fade begins in earnest. By 35 stick a fork in you!
So in Wall Street terms, we would call you a trading position, not a buy and hold...hence the rub...marriage. It doesn't make good business sense to "buy you" (which is what you're asking) so I'd rather lease. In case you think I'm being cruel, I would say the following. If my money were to go away, so would you, so when your beauty fades I need an out. It's as simple as that. So a deal that makes sense is dating, not marriage.
Separately, I was taught early in my career about efficient markets. So, I wonder why a girl as "articulate, classy and spectacularly beautiful"as you has been unable to find your sugar daddy. I find it hard to believe that if you are as gorgeous as you say you are that the $500K hasn't found you, if not only for a tryout.
By the way, you could always find a way to make your own money and then we wouldn't need to have this difficult conversation.
With all that said, I must say you're going about it the right way. Classic "pump and dump."I hope this is helpful, and if you want to enter into some sort of lease, let me know.
Thursday, October 11, 2007
Export / Import September Data
Export / Import data came out today. Normally I do not even glance at this stuff but there were a couple of very interesting points that seem to be trends.
One which I have talked about several times on this blog is China import prices. In May (I think that was the month) import prices switched from declining coming from China to rising. The September number % increase declined from August but it was still positive (if I remember correctly like .4% vs like .6%). The exact numbers are not important, I just glanced to see if the trend continued.
Secondly the trade deficit shrunk again because of surging exports (i.e. weak dollar) but also because of declining imports which shows continuing weakness in the economy.
Two very interesting data points in a normally very boring number.
One which I have talked about several times on this blog is China import prices. In May (I think that was the month) import prices switched from declining coming from China to rising. The September number % increase declined from August but it was still positive (if I remember correctly like .4% vs like .6%). The exact numbers are not important, I just glanced to see if the trend continued.
Secondly the trade deficit shrunk again because of surging exports (i.e. weak dollar) but also because of declining imports which shows continuing weakness in the economy.
Two very interesting data points in a normally very boring number.
Wednesday, October 10, 2007
More Books
http://www.accountability-central.com/single-view-default/single-view-lexis-nexis/article/books-to-get-rich-by/?tx_ttnews%5BbackPid%5D=1&cHash=2cc518c7cf&type=123
Interesting list of books. Always looking at lists of books. Wish I had more time to read.
Interesting list of books. Always looking at lists of books. Wish I had more time to read.
Bankrupt Homebuilders
I am still adamant that I think we are going to have at least one major homebuilder go bankrupt and have continually said the time to buy is around the bankruptcy because I think that will mark the ultimate blood flowing in the streets. With that I said I have been thinking about inching into a homebuilder (which will go unnamed for now) when my fund opens and maybe pair by shorting (probably buying some puts) on another that I think may go bankrupt. You can never call bottoms and do not claim to be any better than anyone else and I do not want to be to late. My guess is three to five years from now select investments in homebuilding companies that support homebuilders will be very lucrative. I just want to make sure and have plenty of dry powder after my initial investment.
Couple of links talking about the potential of homebuilder bankruptcies and a few quotes below that. Homes selling for $.64 on the dollar....
http://www.bloomberg.com/apps/news?pid=20601109&sid=aUiIJ0tcL_OQ&refer=home
http://www.247wallst.com/2007/10/will-one-of-the.html
If fall-off is any indication, Beazer and Standard Pacific are the most likely homebuilders to file for bankruptcy. While shares in most of the larger companies in the sector are off about 40% over the last year, shares in these two firms are down closer to 80%.
If you look at the 2000 bubble (This housing thing is just another bubble, nothing new or different) the S&P was down something like 55% and the NASDAQ like 85%. (Not going back and checking these numbers just from my memory so may vary) Anyway an average of 40% is another indicator we may not have found a floor just yet.
``I ran the numbers and the condos sold for between 68 cents and 74 cents on the dollar based on the original asking prices,'' Moran said.
Couple of links talking about the potential of homebuilder bankruptcies and a few quotes below that. Homes selling for $.64 on the dollar....
http://www.bloomberg.com/apps/news?pid=20601109&sid=aUiIJ0tcL_OQ&refer=home
http://www.247wallst.com/2007/10/will-one-of-the.html
If fall-off is any indication, Beazer and Standard Pacific are the most likely homebuilders to file for bankruptcy. While shares in most of the larger companies in the sector are off about 40% over the last year, shares in these two firms are down closer to 80%.
If you look at the 2000 bubble (This housing thing is just another bubble, nothing new or different) the S&P was down something like 55% and the NASDAQ like 85%. (Not going back and checking these numbers just from my memory so may vary) Anyway an average of 40% is another indicator we may not have found a floor just yet.
``I ran the numbers and the condos sold for between 68 cents and 74 cents on the dollar based on the original asking prices,'' Moran said.
Try to buy stocks at a 50% discount. Is 68% discount enough to buy actual real estate???
Fifty-two percent of builders said they cut prices in August, compared with 19 percent in September 2005, the builders group said. The typical incentive was worth about $5,000 and the median price reduction was about 5 percent, said Stephen Melman, director of economic services for the builders association.
Quant Fund Distortions
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/MarketHackersRunningOutOfAmmo.aspx
Interesting article about the distortions in the market that seemed to be created by quant funds. This type of stuff allows me to make a living.
Below is the meat of the article.
At a recent New York conference, investor Jim Chanos noted a couple of anomalies that, in all likelihood, are a direct function of quant trading. They highlight a disconnect between stocks and their underlying fundamentals that only a computer could love.
It turns out there are two -- and for all I know, more -- closed-end mutual funds that own mundane large-cap S&P-oriented stocks: the Cornerstone Total Return Fund and the Cornerstone Strategic Value Fund. Inexplicably, these funds trade at premiums of better than 50% to net asset value. At one point this year, they traded at premiums far higher.
The connection to the quant universe is that Renaissance Technologies, among the biggest quant hedge funds and certainly a very successful one, is the fourth-largest shareholder in both Cornerstone funds.
Interesting article about the distortions in the market that seemed to be created by quant funds. This type of stuff allows me to make a living.
Below is the meat of the article.
At a recent New York conference, investor Jim Chanos noted a couple of anomalies that, in all likelihood, are a direct function of quant trading. They highlight a disconnect between stocks and their underlying fundamentals that only a computer could love.
It turns out there are two -- and for all I know, more -- closed-end mutual funds that own mundane large-cap S&P-oriented stocks: the Cornerstone Total Return Fund and the Cornerstone Strategic Value Fund. Inexplicably, these funds trade at premiums of better than 50% to net asset value. At one point this year, they traded at premiums far higher.
The connection to the quant universe is that Renaissance Technologies, among the biggest quant hedge funds and certainly a very successful one, is the fourth-largest shareholder in both Cornerstone funds.
Monday, October 8, 2007
Seen and Heard
Talked alot about the markets late last week. A few of the things I heard over the weekend that I thought were interesting. Some of this I knew but worth posting.
1) Apparently what started the market turmoil in August was a large hedge fund getting massive redemption's in July. They traded primarily through Merrill (I think that is the one Britt said) and Merrill prop desk got caught creating massive losses. Top brass as Merrill said they were not going to lose money this way and said enough is enough and decided to shut down the entire desk. Starting in the beginning of August they started massively unwinding their positions. Most of the other big prop desks on Wall Street held very similar positions and were caught with Merrill's unwinding and this caused huge reverberations throughout the markets leading to the crazy action in mid August.
2) Emerging markets are not in bubble territory including China. I was sort of shocked by this one. Unfortunately it was not a long discussion but the numbers put forth to me was that China had a PE in the high 20s / low 30s which is high but by no means bubblish....yet. I had previously heard higher numbers.
3) The market is shifting towards favoring growth after years of favoring value. One reason you are seeing the value guys struggle this year.
4) As I thought there are huge opportunities in the debt market for those who have cash. I have not really been that bummed not buying aggressively with the market going down. I did not figure a 10% correction (for all of like 1 hour) was that much to get excited about. I also lamented at not having access to millions of dollars to be able to buy debt because I thought that was where the huge contrarian play was and where things where really out of whack.
5) Since the Fed was founded in 1913 the dollar has lost 92% of its purchasing power. This will probably happen in 10 to 20 years causing the Dow to rise to 36,000 all things equal. Previous big commodity booms / panics saw the Dow to gold ratio to be 1:1 in 1980 and 1932. (Gold at $100 per ounce and the Dow at 1000) Gold could rise to $1400 currently to achieve that same 1 to 1 ratio.
6) Examined long term charts of small caps, the S&P 500, and the NASDAQ examining where the bubbles was and wasn't. The small cap graph shows barely a blip down wall the S&P 500 was declining and the NASDAQ was imploding. The small caps are not pretty expensive. As everyone should know at this point the value is in large caps.
7) Talked about Jeremy Grantham and how furious he must be at the Fed's actions. Britt has not talked to Jeremy since that rate cut.
8) Talked alot about investor psychology and how poor humans are equipped at investing. Harry Markowitz, the founder of portfolio theory, and really the founding father of modern finance illustrates this. When constructing a portfolio for his retirement after making all kinds of breakthroughs decided to just split 50% in bonds and 50% in stocks because he could not bear the thought of being more in stocks and seeing the market go down or less in stocks and see the market go up. Psychologically he essentially admitted he could not follow what he came up with.
I may add one or two if it comes to me over the next few days but a few snippets I thoughts I would share.
1) Apparently what started the market turmoil in August was a large hedge fund getting massive redemption's in July. They traded primarily through Merrill (I think that is the one Britt said) and Merrill prop desk got caught creating massive losses. Top brass as Merrill said they were not going to lose money this way and said enough is enough and decided to shut down the entire desk. Starting in the beginning of August they started massively unwinding their positions. Most of the other big prop desks on Wall Street held very similar positions and were caught with Merrill's unwinding and this caused huge reverberations throughout the markets leading to the crazy action in mid August.
2) Emerging markets are not in bubble territory including China. I was sort of shocked by this one. Unfortunately it was not a long discussion but the numbers put forth to me was that China had a PE in the high 20s / low 30s which is high but by no means bubblish....yet. I had previously heard higher numbers.
3) The market is shifting towards favoring growth after years of favoring value. One reason you are seeing the value guys struggle this year.
4) As I thought there are huge opportunities in the debt market for those who have cash. I have not really been that bummed not buying aggressively with the market going down. I did not figure a 10% correction (for all of like 1 hour) was that much to get excited about. I also lamented at not having access to millions of dollars to be able to buy debt because I thought that was where the huge contrarian play was and where things where really out of whack.
5) Since the Fed was founded in 1913 the dollar has lost 92% of its purchasing power. This will probably happen in 10 to 20 years causing the Dow to rise to 36,000 all things equal. Previous big commodity booms / panics saw the Dow to gold ratio to be 1:1 in 1980 and 1932. (Gold at $100 per ounce and the Dow at 1000) Gold could rise to $1400 currently to achieve that same 1 to 1 ratio.
6) Examined long term charts of small caps, the S&P 500, and the NASDAQ examining where the bubbles was and wasn't. The small cap graph shows barely a blip down wall the S&P 500 was declining and the NASDAQ was imploding. The small caps are not pretty expensive. As everyone should know at this point the value is in large caps.
7) Talked about Jeremy Grantham and how furious he must be at the Fed's actions. Britt has not talked to Jeremy since that rate cut.
8) Talked alot about investor psychology and how poor humans are equipped at investing. Harry Markowitz, the founder of portfolio theory, and really the founding father of modern finance illustrates this. When constructing a portfolio for his retirement after making all kinds of breakthroughs decided to just split 50% in bonds and 50% in stocks because he could not bear the thought of being more in stocks and seeing the market go down or less in stocks and see the market go up. Psychologically he essentially admitted he could not follow what he came up with.
I may add one or two if it comes to me over the next few days but a few snippets I thoughts I would share.
Sunday, October 7, 2007
Levitt (LEV)
This is a stock I have poured tons of sweat in over the last 12 months on numerous occasions and have passed on each occasion after being extremely close to buying. The latest analysis had to do on the rights offering. I passed again about a month ago which I detail below in an email exchange with a friend detailing my analysis. Was I wrong? Well I don't think so at least in deciding not to participate in the right offering. I was definitely wrong in estimating the success of the rights offering. I thought if the rights offering was successful that their was huge upside in the stock (I estimated about 60%) almost instantaneously because it took bankruptcy out of the cards in the near term. Why I ultimately ended up passing was because I thought it was management's way to get suckered shareholder money through the rights offering while saving a bigger investment (read below if you want the complete explanation) . So it worked as long as everyone else was on board but if only a few people jumped on board those few who did participate would probably lose close to 100%. Well indeed almost everyone was on board. The company announced on Tuesday that it raised $153 million (the absolute maximum its management through BFC would have contributed would have been $32 million and this number has not been released yet. Based on my research my guess is they did not do that much). Well I would have been in perfect position to benefit from the rights offering if I would have noticed on Tuesday that it was such a huge success because I knew what fair value should be. Well because of my incident last weekend with the stitches and following sickness combined with preparing for my presentation for Texas A&M on Wednesday I completely missed it!!! Did not notice until today when I was reviewing all my ideas and the various moves in stocks last week what happened. Ohh the horror. I definitely would have captured about 50% of that upside as I would have been in around $2.25 (bounced around there on Tuesday and Wednesday!!). GRRRR. Well now the stock is within about $.20 of what I estimated fair value to be assuming the offering rights occurred. Missed opportunities like that eat me up especially since I knew the outcomes in various scenarios.
This is a link that describes the success of the rights offering.
http://www.forbes.com/2007/10/05/levitt-bfc-prescott-markets-equity-cx_ra_1005markets35.html?partner=yahootix
Email 1 detailing analysis Aug 23
Leviit entered into a merger agreement with BFC Financial Corporation (BFF) last January where LEV shareholders would get 2.27 shares of BFF for every 1 share of LEV. Well LEV bounced along following BFF price for months until last week BFF called off the merger. Well LEV stock goes from 10ish to about $2.30 now over the last several weeks. Well BFF still owns 100% of LEV B shares (obviously don't trade) and I think 11% of the A shares that do trade. So they still have a big stake.
Well LEV balance sheet is horrible. They have do something soon or they will have to declare bankruptcy. So they are offering a $200 million right offering. Here is EV as it stands.-
Market Cap 46.4
B Shares 2.8
Cash 61.6
Mortgages 569.0
Debentures 85.1
EV 641.7
BXG Investment 83.9
Adjusted EV 557.8
They own 31% of BXG which is publicly traded and that 31% would be worth $83.9 million at today's prices. They probably would have to sell such a huge stake a discount but that ball parks it.
Well below is the land portion of the balance sheet.
Land and land development costs 527.0
Construction Costs 149.1
Capitalized Interest 63.4
Other Costs 36.7
Inventory of Real Estate 776.2
Assets held for sale 71.4
Liabilities related to Assets for Sales -48.8
798.8
All this is mostly in Florida, South Carolina, and Tennessee. Obviously a large portion of this has risk of impairment but the Florida land is good high quality land. Not swampish land like JOE has. When things someday turn around this land has alot of value to it. I am sure they overpaid as they bought it in the peak of the bubble and they had an impairment charge of like $60 million last quarter.
Anyway I wonder if the rights offering would greatly alter the capital structure in such a way that would greatly increase the intrinsic value of the company. Obviously the dilution would be mind boggling but you are essentially transferring a whopping $200 million from debt holders to equity holders. This makes the chance of bankruptcy essentially disappear in the next year or two. So let's say the chance of bankruptcy is currently 50% (have no idea just throwing a number out there) making the equity a zero. X bankruptcy intrinsic value would be call it $4.60 getting to the $2.30 price today. (50% * 0 + $4.60 * 50% = $2.30) (Illustrative purposes only) So you transfer debt to the equity holders eliminating any chance of bankruptcy in the short term and all of a sudden the 50% chance of bankruptcy disappears and the shares should go to $4.60. I don't know but just something to think about.
Email 2 - Aug 26
Hey. Well I have spent quite a bit of time on LEV and I think I am a pass for now. I did a liquidation analysis using various assumptions and came to the end of it and looked at what I came up with and it was within 2.1% of where the equity value would be post right offerings. I could not believe it came out that close. .
I also looked at what it would be trading at post rights offering and compared it to comps excluding the high and low outlier. After the rights offering it would be trading at .5X book at today's price. The average is .87X trailing book which means it has like 60% upside to get to mean. In my mind assuming this rights offering gets done (I am not so sure it really does) it solves their short term liquidity issues and the stock should trade more along the lines with their peers.
I then started some kind of dcf but stopped realizing all this does not really matter. Yes valuation is important and it has got to be cheap but what matters is what management is trying to do in all of this and being on the right side of that equation. I started digging through the proxies of all the related entities and these guys are more inbred than a pack of dogs on an abandoned island. I worked on a flow chart showing all their various investments (directors, officers etc.) and how it all related and overlapped. Good grief, complicated. My original thought was that management might be trying to steal this company through the rights offering. BFC (BFF) bought them out, the housing market continued down worse than expected, they realized they were paying to much for it (though it was all in shares) and announce that they cancel the merger agreement and the stock collapses, come in with a rights offering with oversubscription rights and steal the company much cheaper. I would want to be apart of that and be long it benefiting from managements intentions but I don't think that is the case anymore. If you look at the economic interest the CEO Alan Levan and the Vice Chairman John Abdo have most of their economic interest in BFF. Combine they own stock worth $73k of LEV but $28 million of BFF. So they want to BFF to survive and do well. (They also receive bigger salaries and bonuses from BFF than LEV) So what do they get sticking with the merger agreement? A company on the verge of bankruptcy in need of a major capital infusion of which BFF does not have (BFF is just a holding company). Well BFF investment in BankAtlantic Bancorp is much bigger than its investment in Levitt (and worth alot more). Well thinking about it my guess is considering all the inbreeding that BankAtlantic has lent quite a bit of money to Levitt. If Levitt goes bankrupt they may be writing off some major loans. What better way for Levan and Abdo to protect their bigger investment than getting suckers to give fresh equity money in a rights offering that goes straight to pay off loans owed to Bank Atlantic? The other thing is this rights offering is only for the Class A shares which means that BFF essentially keeps their controlling interest whether they put up more capital or not. The B shares represent 47% of the vote and will not be diluted at all with the rights offering. Anyway what I am thinking now is that they will talk a good game with this rights offering collect some money with the few suckers who do it which my guess is will be well below the $200 million. Use that money and pay off BankAtlantic and then declare bankruptcy. If for some reason they are able to get 200 million they just used tons of other peoples money to shore up their balance sheet, keep voting control, and increase the value of their holdings all in one swoop. There is alot of speculation in all that but it seems reasonable after spending most of my time on all this trying to understand what is in the minds of management.
This is a link that describes the success of the rights offering.
http://www.forbes.com/2007/10/05/levitt-bfc-prescott-markets-equity-cx_ra_1005markets35.html?partner=yahootix
Email 1 detailing analysis Aug 23
Leviit entered into a merger agreement with BFC Financial Corporation (BFF) last January where LEV shareholders would get 2.27 shares of BFF for every 1 share of LEV. Well LEV bounced along following BFF price for months until last week BFF called off the merger. Well LEV stock goes from 10ish to about $2.30 now over the last several weeks. Well BFF still owns 100% of LEV B shares (obviously don't trade) and I think 11% of the A shares that do trade. So they still have a big stake.
Well LEV balance sheet is horrible. They have do something soon or they will have to declare bankruptcy. So they are offering a $200 million right offering. Here is EV as it stands.-
Market Cap 46.4
B Shares 2.8
Cash 61.6
Mortgages 569.0
Debentures 85.1
EV 641.7
BXG Investment 83.9
Adjusted EV 557.8
They own 31% of BXG which is publicly traded and that 31% would be worth $83.9 million at today's prices. They probably would have to sell such a huge stake a discount but that ball parks it.
Well below is the land portion of the balance sheet.
Land and land development costs 527.0
Construction Costs 149.1
Capitalized Interest 63.4
Other Costs 36.7
Inventory of Real Estate 776.2
Assets held for sale 71.4
Liabilities related to Assets for Sales -48.8
798.8
All this is mostly in Florida, South Carolina, and Tennessee. Obviously a large portion of this has risk of impairment but the Florida land is good high quality land. Not swampish land like JOE has. When things someday turn around this land has alot of value to it. I am sure they overpaid as they bought it in the peak of the bubble and they had an impairment charge of like $60 million last quarter.
Anyway I wonder if the rights offering would greatly alter the capital structure in such a way that would greatly increase the intrinsic value of the company. Obviously the dilution would be mind boggling but you are essentially transferring a whopping $200 million from debt holders to equity holders. This makes the chance of bankruptcy essentially disappear in the next year or two. So let's say the chance of bankruptcy is currently 50% (have no idea just throwing a number out there) making the equity a zero. X bankruptcy intrinsic value would be call it $4.60 getting to the $2.30 price today. (50% * 0 + $4.60 * 50% = $2.30) (Illustrative purposes only) So you transfer debt to the equity holders eliminating any chance of bankruptcy in the short term and all of a sudden the 50% chance of bankruptcy disappears and the shares should go to $4.60. I don't know but just something to think about.
Email 2 - Aug 26
Hey. Well I have spent quite a bit of time on LEV and I think I am a pass for now. I did a liquidation analysis using various assumptions and came to the end of it and looked at what I came up with and it was within 2.1% of where the equity value would be post right offerings. I could not believe it came out that close. .
I also looked at what it would be trading at post rights offering and compared it to comps excluding the high and low outlier. After the rights offering it would be trading at .5X book at today's price. The average is .87X trailing book which means it has like 60% upside to get to mean. In my mind assuming this rights offering gets done (I am not so sure it really does) it solves their short term liquidity issues and the stock should trade more along the lines with their peers.
I then started some kind of dcf but stopped realizing all this does not really matter. Yes valuation is important and it has got to be cheap but what matters is what management is trying to do in all of this and being on the right side of that equation. I started digging through the proxies of all the related entities and these guys are more inbred than a pack of dogs on an abandoned island. I worked on a flow chart showing all their various investments (directors, officers etc.) and how it all related and overlapped. Good grief, complicated. My original thought was that management might be trying to steal this company through the rights offering. BFC (BFF) bought them out, the housing market continued down worse than expected, they realized they were paying to much for it (though it was all in shares) and announce that they cancel the merger agreement and the stock collapses, come in with a rights offering with oversubscription rights and steal the company much cheaper. I would want to be apart of that and be long it benefiting from managements intentions but I don't think that is the case anymore. If you look at the economic interest the CEO Alan Levan and the Vice Chairman John Abdo have most of their economic interest in BFF. Combine they own stock worth $73k of LEV but $28 million of BFF. So they want to BFF to survive and do well. (They also receive bigger salaries and bonuses from BFF than LEV) So what do they get sticking with the merger agreement? A company on the verge of bankruptcy in need of a major capital infusion of which BFF does not have (BFF is just a holding company). Well BFF investment in BankAtlantic Bancorp is much bigger than its investment in Levitt (and worth alot more). Well thinking about it my guess is considering all the inbreeding that BankAtlantic has lent quite a bit of money to Levitt. If Levitt goes bankrupt they may be writing off some major loans. What better way for Levan and Abdo to protect their bigger investment than getting suckers to give fresh equity money in a rights offering that goes straight to pay off loans owed to Bank Atlantic? The other thing is this rights offering is only for the Class A shares which means that BFF essentially keeps their controlling interest whether they put up more capital or not. The B shares represent 47% of the vote and will not be diluted at all with the rights offering. Anyway what I am thinking now is that they will talk a good game with this rights offering collect some money with the few suckers who do it which my guess is will be well below the $200 million. Use that money and pay off BankAtlantic and then declare bankruptcy. If for some reason they are able to get 200 million they just used tons of other peoples money to shore up their balance sheet, keep voting control, and increase the value of their holdings all in one swoop. There is alot of speculation in all that but it seems reasonable after spending most of my time on all this trying to understand what is in the minds of management.
Thursday, October 4, 2007
With the Market Making New Highs Does that Write off a Recession?
http://bigpicture.typepad.com/comments/2007/10/are-markets-alw.html
Many of you have probably seen this but I thought it was interesting enough to post. It has been a question I have been asking myself recently. As a side note, David Rosenberg has been a bear for a long time on the economy. One of the very few economist out there who is willing to be bearish. Last time I heard him speak, a few months ago, you do not leave the room feeling all cozy. Talking to him he is a nice guy though.
I will be leaving for Austin and then driving to College Station to help Britt, CIO of the Texas Teacher Retirement Fund, to give a presentation on Warren Buffett and value investing. May not be back on the blog until the end of the weekend so have a good rest of the week.
Many of you have probably seen this but I thought it was interesting enough to post. It has been a question I have been asking myself recently. As a side note, David Rosenberg has been a bear for a long time on the economy. One of the very few economist out there who is willing to be bearish. Last time I heard him speak, a few months ago, you do not leave the room feeling all cozy. Talking to him he is a nice guy though.
I will be leaving for Austin and then driving to College Station to help Britt, CIO of the Texas Teacher Retirement Fund, to give a presentation on Warren Buffett and value investing. May not be back on the blog until the end of the weekend so have a good rest of the week.
More Dollar Issues
http://www.telegraph.co.uk/money/main.jhtml;jsessionid=UJJC40LF55O5PQFIQMGSFFWAVCBQWIV0?xml=/money/2007/10/03/bcnviet103.xml
Qatar and Vietnam diversifying from dollars in a big way.
My visual picture of all this is a small leak in a big dam that as the pressure builds the leak gets bigger and bigger until the dam finally bursts killing everyone downstream. Don't underestimate how long the leak can last though or overestimate once the dam breaks how fast the catastrophic affects are felt.
Qatar and Vietnam diversifying from dollars in a big way.
My visual picture of all this is a small leak in a big dam that as the pressure builds the leak gets bigger and bigger until the dam finally bursts killing everyone downstream. Don't underestimate how long the leak can last though or overestimate once the dam breaks how fast the catastrophic affects are felt.
Tuesday, October 2, 2007
Programming for My Mind
I have been sort of out of action recently. This past weekend I spent like 3 hours in the emergency room to get 8 stitches after laying my lip open playing football. (I have a better story for some of my guy friends that involves defending a random girl on Northgate in College Station but the football story is the true story) I had to get a tetanus shot and I think I had a negative reaction where I had a fever and have been weak for a couple of days so anyway my productivity has been somewhat down.
In actuality though the lack of productivity may be beneficial. I have launched a crusade to unlearn everything that I learned at my prior job. That is slight exaggeration of course because I learned quite a bit about debt and investing within the capital structure but the investing tidbits I picked up are horrific and very counterproductive to long term investing success. I knew it while I was there and know it even more now. So trying to reprogram my mind back to where it was before the job. One of things I have been doing (working out well since I have not been able to do much lately anyway) is watch some lectures from the Colombia MBA program that specialize in value investing. This program is amazing and the only reason I have ever considered getting an MBA. Anyway they can be found here. http://valueinvestingresource.blogspot.com/2007/09/lectures-from-columbia-universitys.html
They are a true class, about 1.5 hr long with such greats as Christopher Browne and Andrew Weiss giving lectures. Anyway there is so much to glean from these lectures and I highly recommend them. I hope to finish all of them over the next week or so.
By the way of the two Andrew Weiss lectures the 2007 one is much better. The 2006 is a repeat of the 2007 lecture without going in as much detail and has some audio problems.
In actuality though the lack of productivity may be beneficial. I have launched a crusade to unlearn everything that I learned at my prior job. That is slight exaggeration of course because I learned quite a bit about debt and investing within the capital structure but the investing tidbits I picked up are horrific and very counterproductive to long term investing success. I knew it while I was there and know it even more now. So trying to reprogram my mind back to where it was before the job. One of things I have been doing (working out well since I have not been able to do much lately anyway) is watch some lectures from the Colombia MBA program that specialize in value investing. This program is amazing and the only reason I have ever considered getting an MBA. Anyway they can be found here. http://valueinvestingresource.blogspot.com/2007/09/lectures-from-columbia-universitys.html
They are a true class, about 1.5 hr long with such greats as Christopher Browne and Andrew Weiss giving lectures. Anyway there is so much to glean from these lectures and I highly recommend them. I hope to finish all of them over the next week or so.
By the way of the two Andrew Weiss lectures the 2007 one is much better. The 2006 is a repeat of the 2007 lecture without going in as much detail and has some audio problems.
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