Tuesday, October 26, 2010

Insurance: Non-Life Business Now Enters Growth Phase


MUMBAI: After playing second fiddle to the life insurance industry for several years, the non-life business has roared back into growth mode. In the first six months of the current fiscal, the industry has recorded 23% growth and there are signs that profitability has improved as well.

“In a stable price environment, the non-life industry should grow by 2-2 .5 times the rate of GDP growth. What we are now seeing is some stability in pricing coupled with opening up of hitherto untapped sectors because of government schemes like the Rashtriya Swastha Bima Yojana,” said ICICI managing director Bhargav Dasgupta .
The growth rate in the first half is almost twice the 13% growth recorded in the whole of 2009-10 .


For the first half of the current fiscal, private insurers have recorded total premium of . 9,204 crore against . 7,312 crore in FY10 — recording a growth of 25.9%. Stateowned insurers have collected total premium of . 14,500 crore in the first half of FY11 against . 11,184 crore in the previous year — resulting in a 21% growth.


Among companies, HDFC Ergo continues to be one of the most aggressive growing by 49%. ICICI Lombard General Insurance — leader among private companies — has grown 32%. Tata AIG General has also managed a 33% growth despite its foreign parent’s troubles internationally.

Wednesday, October 20, 2010

Chinese Housing Bubble


Sunday, October 17, 2010

Demographics of the Worlds Leading Economies

The following chart shows the old-age to working-age population ratio of the world's leading industrialized countries: US, Japan, UK, Germany, etc.

What I see is this: from 1990-2010, Japan's old-age to working-age population ratio shifted from .19 to .36. by 2030, it will be over .50.
The US from 2000 to 2010 went from .20 to .26, and by 2030 will be at .33. That is a drag on growth... but not nearly as bad as it was for Japan.

Sunday, October 10, 2010

Where Are We With Market Valuations?

great source:

Where Are We with Market Valuations?

The Stock Market is Fairly valued. Based on historical valuations, it is likely to return 6% a year from this level of valuation. This page is updated daily with the market.

Total Market Cap and US GDP

The Ratio of Total Market Cap to US GDP

The Predicted and the Actual Stock Market Returns

What returns can we expect from the stock market?

As of today, the Total Market Index is at $ 12196.2 billion, which is about 83.5% of the last reported GDP. The US stock market is positioned for an average annualized return of 6%, estimated from the historical valuations of the stock market. This includes the returns from the dividends, currently yielding at 2.1%.

As pointed by Warren Buffett, the percentage of total market cap (TMC) relative to the US GNP is “probably the best single measure of where valuations stand at any given moment.”

More at the source on:

1. Interest rates
2. Long Term Growth of Corporate Profitability
3. Market Valuations

As of 10/10/2010, the stock market is likely to return 6% a year in the next 8 years.

Note: If this stops updating, look here for Wilshire total market value. (I'd use full cap)

Today it is 95% TMV/ GDP

Is The S&P500 Overvalued? What Can You Expect . . .

This article provides a range of values depending on the scenario chosen. The author believes that a fair value for the S&P 500 Index is within the range of 873 (for required expected return of 9%) to 1031 (for required expected return of 7%), with a mid-point estimate of 944 (for required expected return of 8%). Our assumption is that the S&P earnings will grow with GDP at about 4.5% per year and yield a 2.1% dividend yield and sell at a long-term P/E of 15 in ten years.


Thursday, October 07, 2010

Top Mortgage Servicers

Expanding the Wells Fargo Moat:

Oct 7 (Reuters)
 Below are the largest U.S. mortgage servicers, which
collect mortgage payments and foreclose on delinquent loans, as
of June 30, 2010.
 Bank                           Total Loans         Market
                                Servicing now       Share
                                in $billions
1) Bank of America (
BAC.N) $2,135.30 19.9%
2) Wells Fargo (
WFC.N) $1,811.97 16.9%
3) JPMorgan Chase & Co (
JPM.N) $1,353.60 12.6%
4) Citigroup Inc (
C.N) $677.81 6.3%
5) GMAC/Ally Financial $349.08 3.2%
6) US Bancorp (
USB.N) $189.85 1.8%
7) SunTrust Banks Inc (
STI.N) $175.93 1.6%
8) PHH Mortgage (
PHH.N) $155.97 1.4%
9) OneWest Bank, CA (IndyMac) $155.00 1.4%
10)PNC Financial Services (
PNC.N) $149.94 1.4%
Total residential mortgages outstanding $10,640
 ($ billions, for 1-4 family homes)
 Source: Inside Mortgage Finance

Forest City Q2 2010 Conference Call Notes

value not being reflected by the stock....
YTD net operating income up across all categories
See Supplemental for Geography.
Expect future growth from:
  • NOI
  • development pipeline
last 2 years, $800 million of our share of openings
expect 200 basis point spread over debt on these new openings
242 million cash at holdco, our share.
Working to joint venture of NY retail?
Over the past two years, they've done 2.5 billion in refinances, 100 million had to be put down.
Land & construction loans non-existent

East River Plaza opened. Costco!!
Presidio Landmark- 161 unit. Opened.

Beekmann- 904 units in Manhattan
(2% vacancies in the Manhattan market)
Ridge Hill- working hard to lease it up. Great demographics
Foundry Lofts- units at the DC yards.

From Q&A
Ridge Hill is an $800 million project
Rock Gaming Casino will:
  • lease 200,000 square feet from Tower City.
  • buy adjacent 16 acres
  • drive traffic to tower city
  • 600 million casino investment plus 100 million phase 1 building

Sunday, April 11, 2010

Steak N' Shake Annual Meeting Notes

  • Going forward, the name will be changed to Biglari Holdings, symbol: BH .
  • Many company's have a fixed mindset to blindly reinvest in their business; We're going to examine the landscape and go where returns are the most attractive. Don't expect dividends. Looking at insurance.
  • Companies with low debt and strong balance sheets will acquire those with high costs and weak balance sheets. It's a competitive advantage we intend to keep.
  • Two advantageous aspects of the restaurant business: negative working capital requirements, and little required capital expenditures.
  • SNS Franchise Prototype

    • current model: 4,200 sf, 97 seats, $2.2 million capital cost.
    • New model: 3,200 sf, 94 seats, $1.5 million capital cost.
    • 1 new franchisee expected in Rome, 1 in Richmond by the end of the year. 1 planned in Las Vegas, 1 of 5 planned in Denver.
Notes from Q&A:

On managing and incentivizing managers:
  • There are redundancies. For example, we have 81 stores in Florida. 1 district manager, several regional managers, and then each store has a general manager and then a manager.
  • Every district manager now goes through Sardar. "If all my money were in those 8 stores, would I want this guy running it?"
On Western Sizzlin:
  • cash flows are actually quiet strong.
  • we're making the franchise agreement stronger.
  • between Western Sizzlin and Steak N' Shake, we purchase a lot of beef. We expect improvements in cost from supply chain and procurement.
  • also puts the franchise experience from SNS to WS.
  • The merging of two very long legacies in the restaurant business. (50 & 75 years old)
On Store Prototype:
  • revenue to capital cost should be over 1.
  • I still see the potential for 1500 domestic units.
  • So far, our new franchisees have terrific resources. But we're trying to fix the economics so a small business owner can put up some equity and make it happen.
  • The new prototype brings the grill operations into the open, front and center, so customers can see the show. (In sight, it must be right!)
On running the business:
  • We're not trying to maximize the amount we charge the customer. This may be one of the worst lessons of business schools ever.
  • We're trying to maximize the value of the experience to customers.
  • Take our new Guacamole Steakburger. Rather than buy the guacomole several days old, we put the guacamole in from scratch. We bring the avocados, the cilantro, etc. That's good quality.
On investment management:
  • Possibly streamlining BH with the Lion Fund.
  • Hired someone to raise investment capital.
  • Mustang Capital has increased AUM to 66 million. (Up 18% since March 08)
  • Over the course of the new three years, we should see an international Steak N' Shake.
  • We'll put a company owned SNS on the San Antonio lot. It should happen within a year.
  • We plan to have 5 company owned in-line (strip mall) stores to test out the economics, the model.