Book Value

Icahn Reveals Latest "No Brainer" Idea: Urges AIG To Split, Sees 66% Share Upside To $100

It has been a while since Icahn, who is still looking for a $200+ print on AAPL stock courtesy of corporate buybacks, issued a "no brainer" investment alert. He did that moments ago, when he revealed a "large position" in AIG, whom he is now urging to follow John Paulson's advise in order to hit a $100/share price, by doing two things: "Pursue tax free separations of both its life and mortgage insurance subsidiaries to create three independent public companies" and to "embark on a much needed cost control program to close the gap with peers."

ECB Will Again "Frontload" Bond Purchases Ahead Of The Winter, No Advance Leak To Hedge Funds This Time

Moments ago, as part of its quite stale and otherwise irrelevant minutes of its September 2-3 governing council meeting, the ECB did precisely the same, announcing that as part of its ongoing open-ended QE program (which the ECB expects will be implemented fully by September 2016 "or beyond") it would frontload purchases between September and November because, you guessed it, volatility once again declines in December.

Stan Druckenmiller's "Horrific Sense" Of Deja Vu: "I Know It's Tempting To Invest, But This Will End Very Badly"

“I just have the same horrific sense I had" before, Druckenmiller said to an audience at the Lost Tree Club in North Palm Beach, Florida (according to a transcript obtained by Bloomberg). "Our monetary policy is so much more reckless and so much more aggressively pushing the people in this room and everybody else out the risk curve that we’re doubling down on the same policy that really put us there."

Days Of Crony Capitalist Plunder - The Deplorable Truth About GE Capital

GE’s announcement that its getting out of the finance business should be a reminder of how crony capitalism is corrupting and debilitating the American economy. The ostensible reason the company is unceremoniously dumping its 25-year long build-up of the GE Capital mega-bank is that it doesn’t want to be regulated by Washington as a systematically important financial institution under Dodd-Frank. Oh, and that its core industrial businesses have better prospects. We will see soon enough about its oilfield equipment and wind turbine business, or indeed all of its capital goods oriented businesses in a radically deflationary world drowning in excess capacity. But at least you can say good riddance to GE Capital because it was based on a phony business model that was actually a menace to free market capitalism. Its deplorable raid on the public purse during the Lehman crisis had already demonstrated that in spades.

Valuing (Greek) Banks: A Sum-Of-The-Parts Approach

Traditional banks were built to gather deposits. Their design and infrastructure is geared towards that; they are maladapted to today’s interest rate environment. P2P platforms and other non-bank lenders are eating their lunch. Absent some radical rethinking of their operations model, they are about to go the way of the dodo. Of course, markets are not efficient; it will take time for competitors to move in. Traditional banks, however, have few weapons to fend them off: their brands (much less valuable for loan-origination than for deposit-gather purposes) and their (hugely expensive) legacy infrastructure. It took almost a century for the dodo bird to become extinct.

Bank Of Japan's 10 Trillion Equity Portfolio "Not Large" Says Bank Of Japan

"The central bank's portfolio has a book value of around 5.7 trillion yen. But soaring share prices have lifted its market value past the 10 trillion yen mark -- nearly 2% of the tally for all Tokyo Stock Exchange shares," Nikkei notes. While this may seem like a lot, Haruhiko Kuroda begs to differ.

Warren Buffett - Lucky Coin Flipper?

Last week, Buffett moved the goalposts.  If money were what really matters, Warren Buffett would have no peer. He has had unparalleled success in this world; surely he has a first-class ticket to the next. And if his good fortune were of his own making, what would he have to fear? But what if fortune, which smiled on him so broadly for so many years, begins to frown?

Warren Buffett Releases Monster 43-Page Half-Century Letter To Berkshire Faithful

The day the Buffet "value-investing" fanatics have been looking forward to all year, almost as much as the annual pilgrimage to Omaha, has finally arrived - hours ago Warren Buffett released his historic, 50th annual letter to shareholders, which is extra special because as the Oracle notes in the foreword, "Fifty years ago, today’s management took charge at Berkshire. For this Golden Anniversary, Warren Buffett and Charlie Munger each wrote his views of what has happened at Berkshire during the past 50 years and what each expects during the next 50."

A Permabull Throws In The Towel: "Stocks Are Massively Overvalued", Key Multiples Are Post-War Records

"The median New York Stock Exchange (NYSE) stock is currently at a postwar record high P/E multiple, a record high relative to cash flow, and near a record high relative to book value!  As of June 2014, the median U.S. stock was priced at a post-war high at slightly more than 20 times earnings! Similarly, at about 15 times, the median stock is also currently priced at a record high relative to cash flow. Finally, the median price to book value ratio has only been higher than it is currently in two years since 1951 (in 1969 and in 1998 which were both followed by significant declines)!" - Jim Paulsen

Hugh Hendry Embraces The Central-Planning Matrix: "I Am Taking The Blue Pills Now"

Hugh Hendry's Eclectica Fund has had a great Q4 (up 3.3%, 4.0%, and 5.0% in the last 3 months) despite portfolio risk being quadruple his 'old normal'. How did he achieve this? He begins... "There are times when an investor has no choice but to behave as though he believes in things that don't necessarily exist. For us, that means being willing to be long risk assets in the full knowledge of two things: that those assets may have no qualitative support; and second, that this is all going to end painfully. The good news is that mankind clearly has the ability to suspend rational judgment long and often... He who hangs on to truth has lost. The economic truth of today no longer offers me much solace; I am taking the blue pills now."

The End Of Exuberance?

"Back in the halcyon days of summer, it seemed nothing could go wrong; but now, ...the uncertainties presently being generated have the potential to undermine two crucial kinds of trust – that one must have in the merits of one’s own exposure and that equally critical faith in the reliability of one’s counterparties. If it does, the third great bull run of the 20-year age of Irrational Exuberance could well reach its culmination, after a rally of almost exactly the same magnitude as and of similar duration to the one which ushered it in, all those years ago."

Russia Contagion Spreads To European Banks : French SocGen, Austrian Raiffeisen Plummet

We recently noted the rise of counterparty risks in the financial system due to oil prices dropping (and leveraged derivative exposures) but as the Russia situation has deteriorated so dramatically this week, a renewed focus on bank exposures has sent stocks reeling (and credit risk soaring) among many European (and US) banks. As Bloomberg reports, Raiffeisen Bank International and Societe Generale, the European banks with most at stake in Russia, led European lenders lower. Raiffeisen fell as much as 10.3% to 11.40 euros in Vienna, the lowest level since it went public in 2005. Societe Generale dropped as much as 7.3% to 31.85 euros, hitting the lowest intraday level since August 2013. CDS markets for both also exploded with Raffeisen risk at 27 month highs. As one analyst noted, "There remains a huge amount of uncertainty at this juncture, but the key point is that there are no benign scenarios." While not on the same scale, US bank risk has also widened signicantly in recent weeks (despite equity strength).