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Politics / Re: Great article by Shelby Steele
« Last post by Gregmal on Today at 06:49:17 AM »

 To have no middle ground and opposing parties poles that despise the opposition is very damaging and the US seems to head this way. The problem is that Trump is very polarizing and makes absolutely no effort to reach a middle ground.

I don't think this is correct. Trump is a centrist - the right wing of the Republican Party does not like him, because he's too moderate.
And certainly the left wing and majority of Democratic Party despises him.  But the Trump government of today, looks much more like
the Bill Clinton government of the mid 1990's.  Trump is bringing government back to the center - respect for the military, respect for police,
strong foreign policy (not an apologist), backing Israel, respect for borders, economic focused.

And Trump does not apologize for being American, like Obama.

You can dislike his methods - but his "polarization" is because the previous administration went so far to the left and used identity politics
to brand anyone that did not agree with them as racist, homophobic or sexist.  He fights fire with fire. Look no further than the failure of
Mitt Romney and John McCain - who were so "nice" as not to play dirty like the left. Unfortunately that is our politics today.

From day 1 - the Democrats made it obvious they would NEVER work with Trump - NEVER.  A large majority of the Democrats boycotted
the Presidential inauguration - on the first day!  Our country always prided itself on "Peaceful transition of Power" after Presidential elections.
Democrats totally broke with tradition and started calling for impeachment day one. 

Just ask yourself a common sense question:  How do you work with a party like that?

These are the questions which always seem to draw crickets from Dougie, Liberty, LC and the rest of the crew. You might get called a name though.
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Investment Ideas / Re: SEC - Senvest Capital
« Last post by writser on Today at 06:24:28 AM »
Heh, true, I was thinking the same thing. It's ironic that most of the issues they have with NRE also apply to Senvest:

- trades at a significant discount to NAV for many years.
- lacks scale: G&A expenses exceed peers.
- reliance on an external manager: Richard Mashaal taking home 40% of all fee income.

Quote
As a result, we believe that the Board should immediately change its "investment guidelines" as established under the terms of the Management Agreement and begin selling assets and return the net cash proceeds to investors by way of stock buybacks or dividends.

[..]

Of course this strategy will cause the total NAV of NRE Senvest to decline over time.  Under the Management Agreement, CLNY Richard Mashaal earns a management fee based on the Company's aggregate net asset value.  Since the net asset value would eventually decline to zero in this strategy, the management fee paid to CLNY Richard Mashaal will similarly decline to zero over time.  As a result, CLNY Richard Mashaal may not support this approach [..]
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Investment Ideas / Re: PLBC - Plumas Bancorp
« Last post by Schwab711 on Today at 06:18:02 AM »
Ya, that's a weird chart. It's measuring the ratio of defaults:payoffs, not defaults:loans outstanding (common ratio to measure default rate). I don't understand the purpose of the chart.

The economics of SBA lending is different then normal banking. Normal banking, you give out money (funded from deposits) with the intent of getting your money back over time plus interest. Interest and fees represent your profit.

SBA lending works like the following (see 1st link in 1st reply - I'll update below with new #s):
Bank originates a $1m SBA loan.
SBA (gov't agency) guarantees 85% or $850,000 of the loan.
The guaranteed portion is sold in to the secondary market at 12.5% - 13.5% premium (low if bank keeps servicing rights, high if not, and percents do move some because it's a market).

Bank's POV:
$150,000 non-government guaranteed SBA loan on the books.
$135,000 profit in the year the loan was originated (The SBA also charges a guarantee fee [like FDIC insurance or Fannie/Freddie insurance] + the bank may charge loan origination fees - overall, this is still cheaper capital for a small business then any alternative).
When netted over the long-run, the bank essentially owns a $150,000, 6%-7% loan with $15,000 of capital at-risk. If the SBA loan defaults immediately and has a recovery rate of 10%, you break-even (before any operating expenses and such).

In practice, efficiency ratios are 60%-65% so the 'true' break-even rate is probably closer to 30%-40% recovery rates. Commissions to the banker probably further increase the recovery rate. At the end of the day, SBA loans are high reward loans for the risk absorbed a bank, if you can originate them.


Some common issues with SBA loans is the government guarantee makes bankers lazy and bank shareholders (and the government) pay the price. This means the culture of the bank that a banker works at is important. Secondary market premiums take this in to account by varying to some degree by geographic location and originating bank (from my understanding).

Here's how things can go wrong:
https://www.openthebooks.com/watchdog_what_happens_when_an_sba-backed_loan_goes_bad/


Here's a great study on the SBA loan market outlook:
https://www.windsoradvantage.com/wp-content/uploads/2018/03/WindsorAdvantage-2018SBALoanMarketOutlook-WhitePaper.pdf

In summary, less lenders are comprising more of the total volume because of rules. The value of a loan accounted for by servicing rights is declining. The premium at sale is steady (9.2% - 14.6% for 10Y, 14.7% - 18.1% for 25Y in 2017). The default rate was once 5% but now it is between 1% - 2%.


This is not the greatest deal for the government but it's cheap stimulus for entrepreneurs. Either way, the high volume lenders will likely be more and more profitable in future years.
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Investment Ideas / Re: CTL - CenturyLink
« Last post by longinvestor on Today at 06:06:32 AM »
I will worry if they change the tune he sang as recently as last week. So far nothing but greener pastures for him. Wildcard could be if they ink some revenue deal with TMUS. Or something bigger with Masa down the road.
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On the other hand, the wages and costs in China have been rising for some time and some companies have already moved or planned to move some production to cheaper countries like Vietnam, Cambodia, Bangladesh, etc. So some of moves will accelerate, but also some of moves are not trivial. Depends on whether you're talking about zippers or steel or iPhones. ;) Also unlike previous moves based on cost, there are few places of the size that can replace all China production. This is not insurmountable, but would need planning, cost analysis, etc.
Another two factors: some things are fungible and China production will just go to other consumers rather than US; some products are multipart and possibly the answer is to make parts in China assemble in ??? and then ship to US.

TL;DR: Situation is complex, some things will move or have moved, some things won't. That's why companies presumably have good sourcing depts. ;)
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Investment Ideas / Re: SEC - Senvest Capital
« Last post by Hielko on Today at 06:05:16 AM »
They should try going activist on their own company...
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Investment Ideas / Re: SIRI - Sirius XM Radio
« Last post by vince on Today at 05:35:30 AM »
For very good businesses it has rarely been a good idea to fund acquisitions with stock.
Combined with the decreased buybacks and being at the lower end of the leverage range, they must really think that SIRI is not cheap at all. Otherwise they obviously should have used cash/debt.

Well at over 20 times fcf I dont think anyone really believes its cheap.  And they have commented that the buyback was lowered cause the price got away from them.  I love the fact that they used stock in this case.  it is so rare to see companies do massive buybacks at lower valuations and then turnaround and issue shares at full valuations.  Gotta love it.  What do you think the stock is worth and why?
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The problem is that nobody knows what to do, because Trump starts a trade war with the rest of the world basically. So reconfiguring the supply chain to a different country ( which might take years) is a very high risk proposition, as you could end up with the same tariffs anyways.
I think insourcing to the US will occur, but in a very limited way. For one thing, the labor force to do thiss just isnít available, because there is no slack any more. The best I can come up with a robotics companies, but most of those are foreign too ( Fanuc, Kuka). Those may get hit by tariffs as well.
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