Street Capitalist: Event Driven Value Investments

I’m in the middle of final exams till Monday, so I haven’t really had any time to write original content to post up here. Till then, check out some good articles/blog posts I’ve seen recently, all of these are great reading.

Nick Nejad posts notes from Warren Buffett’s talk in San Francisco:

Q: Your views on the US Dollar?
A: The most important question to ask in economics is “X happens, and then what?”. We are living prosperously but every day we are sending 2 Billion dollars overseas because we consume more than we purchase. It is similar to if we owned say a large farm in Texas. We are extremely wealthy, but every year we mortgage a little bit of that farm in order to enjoy more of the present. And it is gradual, but then at some point you have to spend an hour or maybe 2 hours a week of your work to go towards servicing this debt. The problem is at some point either foreign investors will stop financing our consumption, or our future generation will be burdened with a debt and have to work some X hours towards servicing the debt of the earlier generation. But the present over-consumption is unsustainable.

Q: Your views on new products such as derivatives, SIVs, etc. ?

A: There’s utility in securitizations. But the problem is these have become complex and the originators and investors have been stretched so far in part in the whole process.

Full Notes on the Warren Buffett Talk

Allison Connolly’s article on the Esmark/Mittal Steel/Sparrows Point deal is an important read for anyone who owns shares in Esmark. I do, but the company itself makes up a pretty small part of my portfolio. Still, the uncertainty of the Sparrows Point deal has sparked a 40% drop from where I purchased Esmark (ESMK) — which used to be WPSC, and it will be an interesting situation to watch as it unfolds. I think even if the sale falls through, the company will remain undervalued, so I may be averaging down on my position in the near future.

The deal to sell the Sparrows Point steel mill to E2 Acquisition Corp. is in flux as discussions continue while possible new partners wait in the wings.

Two self-imposed deadlines have come and gone as ArcelorMittal and E2 and the United Steelworkers union have tried to hammer out a final agreement. Because of the delays, agreements between E2 partners and Chicago Heights, Ill.-based Esmark Inc., which is leading the joint venture, have expired.

Full Article on Sparrows Point Sale via Baltimore Sun

Kate Kelly’s article on Goldman Sachs and their bearish sub-prime trades is another great read. The traders at Goldman did an outstanding job with going short sub-prime, and the article really highlights Goldman’s risk management and bet-sizing:

The subprime-mortgage crisis has been a financial catastrophe for much of Wall Street. At Goldman Sachs Group Inc., thanks to a tiny group of traders, it has generated one of the biggest windfalls the securities industry has seen in years.

The group’s big bet that securities backed by risky home loans would fall in value generated nearly $4 billion of profits during the year ended Nov. 30, according to people familiar with the firm’s finances. Those gains erased $1.5 billion to $2 billion of mortgage-related losses elsewhere in the firm. On Tuesday, despite a terrible November and some of the worst market conditions in decades, analysts expect Goldman to report record net annual income of more than $11 billion.

How Goldman Won Big On Mortgage Meltdown