Archive for January, 2008
Hank Greenberg, the ex-chairman of AIG (AIG), the guy who made AIG what it is today, hired an investment banker to help him figure out what the company is worth.
He is thinking about unloading the stock. If Hank doesn’t want to own this financial conglomerate - and he knows a lot more about its businesses than you and I ever will - should an average investor own it??
I looked at AIG awhile back, it looks incredibly cheap on price to reported earnings, but its balance sheet has $40 billion “other” lines. Is it “other” good stuff or bad stuff? I don’t know. In today’s environment it’s likely to be the latter.
January 22nd, 2008
I talked to Jim Ellis at BusinessWeek about my book Active Value Investing (here is a link to the video). As you will see, if you tie my hand I’d go mute.
At about the same time I talked to TheStreet.com (here is a link to the video) about Apple (AAPL) and Jackson Hewitt (JTX). It was taped right next Wall Street in October 2007.
January 22nd, 2008
I welcome the Bank of America (BAC) acquisition of Countrywide (CFC), as for the first time as I can remember BAC acts as a contrarian investor. I really don’t know what CFC is worth but I know it is worth more in BAC’s hands than as a stand alone company. BAC will be able to provide CFC with liquidity and staying power to survive through the current crisis. In other words it brings continuity to the table (customers and partners that were having second thoughts about dealing with CFC are likely to stick around now).
I am applauding this deal because typically these are done at the top of the market, but BAC found a restraint to wait till things went to hell. Yes, it was early with its first purchase, but picking bottoms is not easy, even for almighty BAC.
January 12th, 2008
I originally wrote this short story to be a part of the article about Jackson Hewitt and IRS’ (possible) allegations that refund anticipation loans create an incentive for tax preparers to commit fraud.
When I was in the third grade, growing up in Murmansk, a city above the Polar Circle in (then) communist Russia, my buddy and I decided to start a business. We pooled our modest funds (mostly lunch money), bought photo paper and chemicals, and borrowed my older brother’s photo camera and photo development machine. This was in the early 1980s, a time before scanners, laser printers and copying machines. We took pictures of music record covers from the likes of Iron Maiden, Jethro Tull and Kiss, developed those pictures and sold them in school during breaks.
The business was going well, we were onto something, there was nothing like this available. We recouped our costs, and had a small profit, until one dark day (it was always dark during long sunless winters in Murmansk). My buddy and I were taken into the principal’s office. We were told a student stole money from another student, and when he was caught he said he stole money to buy our pictures. Suddenly, with this twisted logic we were at fault. Never mind that we were breaking copyright laws. There was no way in early 1980s to obtain copyright, even if we wanted to. We created the incentive to steal.
My father unapologetically told the principal that we were as much at fault as the movie industry and toy retailers — the creators of incentives. Of course, none of that mattered. To appease the school authorities I donated my profit to the World Peace Fund (still not sure where that money went, maybe ended the Cold War? Nah, I doubt it). My buddy and I received an “F” for the behavior, which was not a big downgrade for me since I rarely got a grade much above “C” for behavior.
January 9th, 2008
The avoidance of taxes is the only pursuit that still carries any reward.
John Maynard Keynes
Jackson Hewitt (JTX) declined significantly yesterday on news the IRS proposed regulation to ban refund anticipation loans, or RALs. Fear of the impact the new rules could have on JTX’s business drove it and H&R Block (HRB) down, although HRB faired better as it had already been beaten down by company specific issues stemming from its subprime mortgage business.
RALs are originated to customers who don’t want to wait a couple of weeks to get their tax refund from the IRS, and thus are willing to pay a 2-2.5% (capped at $95) fee to get their money right away. Though RALs are as controversial as payday loans that charge annualized triple digit interest rates, this is not the reason why the IRS is zeroing in them. After all, the IRS mandate is to collect taxes, not to legislate morality.
Continue Reading January 4th, 2008
RSS 
Send Email