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On gun control, the only consistent conclusion that the report you cite states, is that data is inconclusive and results are mixed. This is hardly evidence one way or the other.

But, I think you are jumping to conclusions that "we just want to take your guns". I've always agreed with this response by Obama, which I think is a more balanced response to the issue:

https://www.youtube.com/watch?v=6imFvSua3Kg

Obama wasn't as bad as the conservatives would like us to believe he was.  He actually didn't pass or even seriously propose any new gun control as far as I know anyway.  His big thing was getting gun violence studied by the CDC, which he was successful in doing (see the link above), and he couldn't show that there was a clear link between gun control and reduced violence. Where as Trump already has supported gun control, such as the ban on bumpstocks.  So in my eyes, Obama was better on guns than conservative darlings like Trump or Reagan are/were.   But Obama really didn't answer the guy's main question in this video about why the good people of Chicago (and many other cities) aren't allowed to have/carry guns to protect themselves?   The bad guys get guns and always will, the only question is why does the government try to restrict the people who follow laws from having them?

He (and other left wing politicians) like to throw around the phrase "common sense gun laws", but I don't think there are any such things.  Laws should govern actions not possessions.  I'm fine with laws against threatening people with guns, or doing something dangerous like handling them in a manner that is irresponsible  (akin to aggressive driving or drunk driving laws), and of course there should be laws against hurting people with guns.  But there shouldn't be any laws about owning guns or safely carrying them (openly or concealed).  You simply can't (or shouldn't) license a basic human right.
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@sculpin - Thanks!
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Fairfax Financial / Re: Credit default swaps
« Last post by StubbleJumper on Today at 10:56:04 AM »
I don't recall having seen any reference to European CDS in FFH's recent filings.  Have I missed something?  I do recall there being CPI derivatives for a broad range of geographics, and FFH floated some Euro denominated notes, but can't recall anything else.

For the CDS, were you thinking of sovereign debt, or corporate?


SJ
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Investment Ideas / Re: WFC - Wells Fargo
« Last post by cmlber on Today at 10:48:56 AM »
But by "they can't" I mean 'I don't think regulators will let them'

But regulators ARE letting them...  their 2018 (Q3 2018 through Q2 2019) Capital Plan was approved in June and authorizes WFC to return $32.5B for a business that's earning ~$20B.

At the current price you're not paying for any growth.  We're earning 10%/year (giving no credit to the cost cutting initiatives) just as long as the business doesn't shrink.  The asset cap won't cause the business to shrink...  In a world with 2.9% 10yr treasuries that is stupidly cheap.  And it comes with very good downside protection.  TBV/share is $31.41; if the business continues as is for 3.5 years and then liquidates, we'd come out whole.

I think at this point, at this price, the asset cap and associated scandals are a positive.  Any other big bank you have to worry if (more likely, when) they're going to have a Wells Fargo moment.  WFC has had 1,000s of employees, consultants, and regulators looking in every corner of the business for skeletons in closets for 2 years now.  Once the cap is gone I think we'll be able to put a pretty high degree of certainty on the fact that WFC has the least regulatory risk of the big banks.

WFC's RWA currently includes just $319.4b in "operational risk" from $299.6b at the beginning of the year. BAC is currently at $500b. I would suspect WFC's operational risk will rise towards ~$400b. I have never tried to look in to how this gets calculated but WFC has certainly failed many internal processes that contribute to this capital weighting. That's an extra ~$9b or so of capital that must be retained, if WFC goes to $400b.

Directionally that's a fair point, although I'm only crediting them with $20B of excess capital so there's still a buffer.
What's the basis for this assumption though?  Not the direction of "up" (which is a reasonable assumption), but the magnitude and specificity of the $400B number?  Like you, I also am not entirely sure how this gets calculated, but assuming it was previously calculated properly, the account opening scandal shouldn't have that enormous of an impact.  Operational risk is meant to capture the size and frequency of losses due to internal failures.  The account opening scandal didn't really cause significant losses.  It caused significant damage to Wells' reputation, but I don't believe "operational risk" includes that type of damage. 

You're correct, if Wells wants to increase its RWA by moving up the risk-return curve for more yield, then the excess capital can't all get distributed.  But on the other hand, that would mean earnings would go up wouldn't it...  Regardless, I don't see any evidence of this happening, and think its much more likely that they stick to business as usual and manage the asset cap by plowing cash out to shareholders and shedding some low-quality business for a brief period of time before getting back to absolute growth.
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Investment Ideas / Re: OSTK - Overstock.com
« Last post by ERICOPOLY on Today at 10:37:27 AM »
I think his eccentricity is a marker for something in his psychological makeup.
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Investment Ideas / Re: BAM - Brookfield Asset Management
« Last post by khturbo on Today at 10:34:44 AM »
I think you are missing my point.  I am describing a discount for structure which the market applies to all assets.  In your example if BAM buys something they think is worth $1 & it is selling for 70 cents & BAM buys the market will only attribute (70% of $0.70) 49c to the $1 of assets.  Remember the discount is based upon the market value of the assets less a discount for lack of control & overhead it is not based upon BAM's estimate of intrinsic value.  So you are losing 30% out of the gate.  What is worse is if BAM is right you end up at breakeven, if they are wrong you get a loss.  The 30% discount on the purchase only goes away in a spin-off.  IMO a 30% discount is alot to pay for an incentive for BAM not to do something in the shareholder's best interest which can be implemented in a different way easily, have managers own direct interests in subs directly versus via BAM.  IMO you should not be invested here if you think Bruce has set up a culture that will flip to asset gathering when he is no longer around.

The difference between BAM & Liberty & the trackers is BAM gets a fee stream that is safer & should be valued higher than the value of the assets they are managing.  As far as I know, there is no part of the Liberty universe where this is happening.  IMO if BAM were a pure asset manager, they would trade at a higher valuation than as an asset manager holding large stakes in their investments. 

I see the buy at a discount & hope it closes in value investment thesis all the time but it is an illusion.  You will never close the gap. I have yet to find a situation where this occurs because you do not control the asset & there are corporate expenses.  This is not mispricing or discount that will disappear due to economics.  This discount is the reason why BAM has lagged the performance of its subs.  You would expect the asset manager of asset to have better economics & returns than the underlying assets but here you do not.  Why?  The reason is the discount associated with holding the subs.  This is drag that will only get worse the more investments they make in the subs.  I do agree the discounts can be excessive, but to say they should not be there IMO is wrong, misleading & not proven out by market evidence.  Spekulatius pointed out another example of this in the GP/LP structure of MLPs & how eventually the situation became untenable & now they are restructuring.  IMO the same should happen here.

Packer

No I understand what you're saying. I get that it hurts a bit to have the market not assign full value to the underlying asset. And you're right, a hard spin of the partnerships would almost certainly lead to a higher multiple on all the cash flow. I'd think if they did that your value as a BAM holder would probably go up 20-25% overnight.

But you give up a lot for that. Now you have a bunch of fcf that can either be paid out as dividends or used to buy back stock that is less undervalued, hurting your IRRs on the value of your company by at least a couple percent. You can't buy more partnership units when they're really cheap. You're less aligned with the partnerships, which your institutional investors wouldn't like. You have a higher stock multiple but less accretive investments to make and you're inviting long-term incentive problems. As a long-term owner, wouldn't you just rather have the stock be a bit cheaper, have the value compound at a higher annual rate, and align the incentives better with your clients?
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Investment Ideas / Re: OSTK - Overstock.com
« Last post by ERICOPOLY on Today at 10:30:33 AM »
Would Patrick have left his job to chase gold in 1849?

He left a boring Berkshire subsidiary to found an exciting .com retailer when .com was hot.

Now he is straying from online retail to exciting blockchain when that is hot.

Am I being unfair? 

The stock crash has led me to think about him more critically, it's human nature.

He deflected and used the naked shorts for a long time?  Now that case is closed and soon afterwards he is throwing in the towel?

For all the talk of how much Overstock is a compounding machine (it's in the thread if you read it), you'd have 4x your money in Berkshire stock over the past 15 years.  Not the case in this stock unless you traded on the surges. 

Rumor may be getting around Wall Street that nobody wants it at his price?  Or they do, but that rumor is circulating anyhow?




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New coverage on Dundee Precious Metals (DPM - TSX - $3.44) today with a NAV & target of $6.35. DC.A owns 36.4 million shares worth about $125million. At net asset value DC's 20% stake in DPM would be $230 million or about close to $4 per Dundee common share.

Dundee Precious Metals (DPM-T, Buy) Analyst Jacob Willoughby is initiating coverage of Dundee Precious Metals with a Buy rating and a 12 month target of C$6.35 

Previously, DPM experienced a period of major capital investment at its three main assets (all 100% owned): its Chelopech and Krumovgrad mines and its Tsumeb smelter. Now, those major capital investments are complete and the company and its shareholders are set to be rewarded with free cash flow levels exponentially higher than in its past. DPM should produce about 190k oz. in 2018, but reach over 235k oz. in 2019 at cash costs well below $700/oz.  Production should average 275k oz. a year from 2020 to 2023. DPM is undervalued relative to its peers. 

We feel the market is assigning ZERO value to its Tsumeb smelter while also overstating the sovereign risk associated with operating in Bulgaria, making this an excellent buy at current levels.

The company also has a great balance sheet, with $35.5m in working capital, $25.8m in investments and only $39m in long term debt.

Our calculated NAV for DPM is C$6.34.  A multi asset company with its own smelter should trade at up to 1.0 its NAV.  Applying that 1.0x multiple to our NAV gives our share price target of C$6.35.
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Investment Ideas / Re: DRM - Dream Unlimited
« Last post by KJP on Today at 10:13:07 AM »
I believe this theory from the Brookfield thread also applies to the Dream's continued accumulation of Dream Office and Dream Alternative units:


I see the buy at a discount & hope it closes in value investment thesis all the time but it is an illusion.  You will never close the gap. I have yet to find a situation where this occurs because you do not control the asset & there are corporate expenses.  This is not mispricing or discount unless the discount is excessive.  This discount is one reason why BAM has lagged the performance of its subs.  You would expect the asset manager of asset to have better economics & returns than the underlying assets but here you do not.  Why?  The reason is the discount associated with holding the subs & holding large stakes in the subs in the first place.  This is a drag that will only get worse the more investments they make in the subs.  I do agree discounts can be excessive, but to say they should not be there IMO is wrong, misleading & not proven out by market evidence.  Spekulatius pointed out another example of this in the GP/LP structure of MLPs & how eventually the situation became untenable & now they are restructuring.  IMO the same should happen here.

Packer
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Books / Book Recommendations on Modern Train Businesses
« Last post by nickenumbers on Today at 10:10:58 AM »
All,

I am looking for book recommendations on modern railroad operations like the Class 1, and perhaps the Class 2.

I'd like to learn about the drivers, competitive dynamics, strategy, etc.  All that cool ins and outs of what it takes to be successful wand what are the killers.  Metrics for success and failure.  If there was an analysis of trucking vs. rail, vs barge...  that would be the cat's pajamas!

I am planning on starting my own railroad and I am doing a little background investigation.  KIDDING..  I like the transpiration industry!

Thanks in advance.
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