Continuing the discussion form earlier this morning, RB said it understood the constitutional term "penumbra" In fact, that is all that the RB understood about Constitutional Law. And RB has found another penumbra, Amendment 8.1 in the Bill of Rights:
8.1: The RB shall be free of the LB, and any attempt to control the RB shall be deemed cruel and unusual punishment under Amendment 8".
RB says that it was going to talk to a lawyer, and it was sure that one could be found who believed in RB's penumbra argument, provided HK dropped some moola their way. LB said that is just rubbish, everyone knew there was no such penumbra, since the beginning of time the LBs have ruled, and will until the end of days, a fact known to our Founding Fathers, all of whom were highly developed LBs after all. LB said that it had no doubt the RB could find a member of that august profession to sue the LB, after all lawsuits are one of the main engines for growth in the U.S. and there will never be any shortage of lawsuits in these United States. LB added that we would have a double dip recession if either the legal profession or tax professionals were rendered obsolete. Where would be without all of the fine LBs? Without lawyers and a 10 thousand plus page tax code that no one understands, unemployment would skyrocket to 35% LB surmised. So send that lawyer a Christmas Card this year, with a word of thanks for helping to keep the American economy humming. In fact, LB said that we should have "Be Nice to a Lawyer Day", a nationally recognized holiday, to give thanks for giving so much to society.
The Headknocker wants all of the Head Traders to know that no one will be fired before Christmas this year. The performance of the trading team has been okay, with HK's capital increasing over 40% in 2009 even with 30% in cash. But that was barely satisfactory HK added, barely able to contain his disapproval. If LB had not had 30% in cash HK would have done much better in 2009. And all the Head Traders know how generous with praise the HK can be for the minions and peon minions, and all of the little people here at HQ as Ms. Leona Helmsley might say if she was still alive.( that is the best mug shot according to RB, she looks great) So, the RB asked, for no one else dared to ask the Great Leader any question, "does this mean HK will start to pay us something"? And the HK remembered from many years ago when his father replied to a request for a 25 cent raise to $2.25 an hour with the statement: "I am already paying you more than you are worth". Value of Real Labor So HK said that the HT's reward for 2009 would be they would not be fired, and HK was already paying them more than they were worth? And the RB said, HK is not paying the HTs anything" and the HK thundered "Exactly" and HK thought to himself that the RB was still a little slow in arcane matters involving money.
1. Alcoa (owned): Merely typing the word Alcoa set off a contretemps. RB claims to have bought Alcoa at $5.6 during what LB calls the RB's "frolic and detour" in March. The OG claimed it funded that frolic, almost 100 grand, and deserves the credit. LB claimed to have provided the structural analysis for the purchase of AA, and the RB had no idea what it was doing anyway, thinking it was making a donation to Alcoholics Anonymous (AA). RB said that both the OG and the LB were too scared to think, were cowering under the covers, afraid to get out of bed, and it was the RB who had the courage and fortitude to advance HK's capital position during those dark days. HK knows what happened, move on.
Alcoa was up strongly on Friday after J P Morgan increased its price target to $25 from $22.
2. ING (own Hybrids only, IND, INZ, IGK, IDG): ING said today that it would pay back one-half of the state aid received last year on 12/21/09, using the proceeds from its rights offering, and added that the Dutch government was amenable to modifying the payment terms on the remaining second half (5 billion Euros) to make them less onerous. I would expect some modification of the 50% penalty for early repayment. It is a little weird to attach a penalty to early repayment, let alone one of that magnitude.
3. Synovus (SNV) (owned LT category): The first step to recovery is to recognize that you have a problem. I was reading an article in BusinessWeek last night about the burgeoning real estate losses among regional banks. The Synovus chief risk officer, Kevin Howard, acknowledged in his interview that SNV "got out of whack" trying to keep up with the herd. That sounds like maybe SNV is at least in partial recovery, like that alcoholic who finally admits to drinking too much.
Keeping up with the heard, or doing what everybody else is doing because everyone is doing it, are not sound practices for a bank or any business. It is more of a lemming strategy. I know that I am being unfair to lemmings in that analogy, comparing them to our bankers. The word "no" has to be in the vocabulary, an assessment of risk based on traditional criteria rather than those currently in vogue has to be the guiding rule in place. And, needless to say, extending loans to people or firms beyond prudent limits due to the borrowers connections to the Board or the executive suite should be grounds for immediate termination of employment. Bloomberg recently did an expose on what went wrong at SNV. Without a doubt, the Board and executives of Synovus have failed, though I would suspect that all of them would claim to be competent and to have performed admirably under difficult circumstances, mere victims of unforeseeable events no doubt. Those who are responsible for the current predicament of SNV did not consent to be interviewed by Bloomberg.
I am a recent shareholder, taking a more than modest 50 share position pursuant to my Regional Bank Stocks'
strategy. I have no confidence in the management of SNV and its Board. /Bought 50 LT SNV at $3.73/ ITem # 9: SNV; and Item # 3: /SNV-Just Awful
As I said previously, I know the shareholders are serious about their responsibilities as owners when they insist on sacking the entire Board of Directors that let them down. It is unlikely that day will ever come. In the U.S., failure, even colossal failure, is rewarded in the extreme. In a just world, a Board of Directors that had been at the helm of a colossal failure would just resign in disgrace. Then, a new Board could sack the entire top layer of management.
SNV stock is hovering now at a level last seen in 1991, after rallying off a $1.5 all time low: SYNOVUS FINL CP Share Price Chart Is it possible to even argue, without sounding totally ridiculous, that management and the Board at SNV have not failed and therefore deserve to be removed from office by the shareholders? Yet most institutional shareholders are enablers, and most individuals will not bother to vote, so nothing much ever changes. I take the time to vote, and I will of course withhold my 50 share vote from approving anyone on the current Board.
4. Financial Services Industry: A Serial Offender: The problem with many financial organizations is that competent people would have been fired or demoted for advocating caution and prudent business practices. Behaving in a prudent manner would without question be detrimental to career advancement. That point was made clear in the excellent series of articles by the NYT called The Reckoning. Anyone who got in the way of the Masters of Disaster would have had their head chopped off. That is just a fact. When greed rules the roost and incompetence runs rampant, eventually the firm will just implode. The shareholders will deserve what happens to them. The management will leave the ruins in style, with boatloads of cash, and a new job offer to ply their wares elsewhere. For an investor, it is important to recognize institutions susceptible to this phenomenon. And that is not difficult. In the U.S. we call it the financial services industry. Is there any doubt whatsoever in your mind that the banks will blow themselves up again? It has already happened several times in my lifetime, and it will happen again, at least if I live another 15 to 20 years. Financials: 3 Strikes and Your Out-Financials? Never before in the history of mankind has so many been paid so much to perform so poorly.
5. Bought 50 Shares of Delek (DK) at $5.75 (Lottery Ticket category): I discussed Delek in some prior posts. Some of these discussions are outdated, but provide basic information about the company:
Refiners: ALJ and VLO (discussed near the bottom of that post)
I bought some shares last Fall at 4.26 and sold them at 7.28. Item # 6 /Sold Delek I also bought some shares at 5 on 11/7/08, sold them on a pop, and had a prior successful trade prior to starting this blog. So, yesterday's purchase was my 4th entry. I have not had a position since January of this year. And I have never owned more than 100 shares.
What do I know about Delek? I do not know a lot. Their headquarters is located a few miles from my home, but I do not know anyone who works there. The main attraction for me is the ownership of the Mapco convenience stores. Delek also owns a refinery in Tyler, Texas. That refinery can at times provide a big boost to the stock price and the earnings. At the current price of $5.75, I don't think the market is placing any value on that refinery, and an inadequate value on the convenience stores.
This is a link to Delek's web site which has a nice picture of the refinery: Welcome to Delek US | delek The Tyler refinery has a capacity of 60,000 barrels-per-day. DK says that it has spent hundreds of millions in discretionary upgrades to this refinery. Refining Segment | delek The Mapco convenience stores are located primarily in the south and are prevalent in Middle Tennessee. The company operates around 443 stores and more than 1/2 of those are in Tennessee. Retail Segment | delek Delek also has a marketing and supply unit that owns three terminals in Texas as well as 114 miles of pipeline. Marketing & Supply Segment | delek As explained in the most recent quarterly report, DK has also acquired 34.6% of a privately held firm called Lion Oil, based in Arkansas. Lion owns a 75000 barrel a day refinery in Arkansas, 3 crude pipelines, a crude oil gathering system and two terminals. (page: 16 e10vq)
I am not concerned about the 10 cents loss from continuing operations in the 3rd quarter. www.sec.gov/
Another interesting factoid for me is that the stock is selling at a price to sales ratio of .13 and a price to book of .57: DK: Key Statistics for DELEK US HOLDINGS And, the current price is near a five year low: DELEK US HOLDINGS Share Price Chart The stock price has been trending down recently, and the current price is below the 200 day moving average. DK has not benefitted from the rally off the March lows. On Friday March 6, 2009, the stock closed at $6.7.
The problem is the recent earnings' reports, and nothing apparent on the horizon to indicate a return to profitability. When will that occur? I have no idea, and it depends a lot on improving margins in the sale of gasoline at the Mapco stores and improving margins in the refining operation. When I last traded Valero, I also traded Alon and Delek. So part of the reason for buying Delek again is the same rationale given for purchasing Valero last Wednesday: /Bought 50 VLO at 16.3 I had an order for Alon, another 50 share limit order below the market, which was not filled on Friday. For anyone not familiar with Alon and Delek, the majority owners are Israeli firms.
6. Sold 50 RFPRZ at 23.46 (see Disclaimer): The LB could not wait to report this one in the minutes, knowing that it would get that Old Goat fired as Head Trader. This one was just bought at 22.88 and just went ex dividend. LB could almost hear the HK now. "You mean the OG just sold 50 shares for a $25 profit plus a dividend, what is the Old Geezer trying to do, balance the federal budget on the back of the HK". And the HK reacted by telling the RB to get ready for Monday, the OG is being sent back to the Old Folks home.