Tag Archives: Housing

Wells Fargo Pick-A-Pay Portfolio: Presented without Comment*

4 Mar

Some of you have may have noticed the ongoing debate regarding the Pick-a-Pay portfolio of Warren Buffett’s beloved Wells Fargo (NYSE: WFC). In order to put this horse to pasture, I present the following with no pejorative words and only a few minor comments.

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10 Things Wells Fargo Wants You to Ignore

28 Feb

It has been well documented that Warren Buffett is Wells Fargo’s biggest fan – and largest shareholder (through Berkshire Hathaway). In fact, in his annual letter to shareholders he states that WFC is likely to increase its dividend the most among his common stock holdings. Given that WFC cut its dividend after taking TARP money, his prediction should not come as a surprise.

Another interesting comment from the Oracle of Omaha was his take on Black-Scholes. He writes that the model “produces WILDLY inappropriate values when applied to long-dated options” (emphasis mine). Then he wryly states that he “would rather be approximately right than precisely wrong.” Continue reading

“Data” From Trade & Industry Groups Is NOT To Be Trusted, Part 74,301

18 Feb

I don’t care whether the data if from the National Retail Federation, the Mortgage Bankers Association, the National Association of Home Builders or, my personal favorite, the National Association of Realtors or any other industry group.  It’s ALL garbage!  DO.NOT.TRUST.THEM!  They exist for the singular and sole purpose of drumming-up business for their members; retailers, mortgage brokers, home builders, and realtors, respectively.  Their “data” and “analysis” will, with almost 100% certainty, grossly overstate any realistic projections and even worse, produce misleading historical “data” to boot!

Compare Recent data from the National Association of Realtors (pdf) with the data from analytics company Corelogic (CoreLogic_December_2010_HPI, I have the Excel file but can’t upload to WordPress).  NAR says the price on existing home sales increased 0.5% in 2010, while the price on new homes increased 2.2%.  Corelogic’s national single-family combined home price index shows a -5.46% change.

Who do you believe?  The industry group that represents people who make money when houses are bought/sold for the most amount of money, or an independent analytical shop that uses a pretty robust methodology (reproduced below)?

The CoreLogic HPI incorporates more than 30 years worth of repeat sales transactions, representing more than 55 million observations sourced from CoreLogic industry-leading property information and its securities and servicing databases. The CoreLogic HPI provides a multi-tier market evaluation based on price, time between sales, property type, loan type (conforming vs. nonconforming), and distressed sales. The CoreLogic HPI is a repeat-sales index that tracks increases and decreases in sales prices for the same homes over time, which provides a more accurate “constant-quality” view of pricing trends than basing analysis on all home sales. The CoreLogic HPI provides the most comprehensive set of monthly home
price indices and median sales prices available covering 6,208 ZIP codes (58 percent of total U.S. population), 572 Core Based Statistical Areas (85 percent of total U.S. population) and 1,027 counties (82 percent of total U.S. population) located in all 50 states and the District of Columbia.

Not only does the National Association of Realtors (and really, ALL trade groups) issue over-optimistic future predictions (to get people to buy/sell houses), but they misrepresent historical data!  That should be a crime (if it isn’t already)!

I’m not saying Corelogic’s data is 100% accurate, but I will take their #’s over a trade group’s every.single.time.

UPDATE: Jonathan Miller of Miller/Samuel has a good post about this as well, and includes the NAR’s explanation of their bogus methodology.  Highly recommended read!

GSE Reform: No proof in the pudding

13 Feb

Worse than too-quick, unsatisfying sex

Last Friday the Obama Administration and the Department of Treasury released their long awaited and overdue plan for housing reform. They delivered a whole lot of nothing: No plan, No future of mortgage secondary market, No future mortgage buyer of last resort, and No substance. The kids at the Department of Treasury must have written this paper during their senior economics policy class at their Ivy League school. (At my alma mater they would have received a mid “C” for this crap if the professor were in a generous mood.)

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Why the Wells Fargo CFO Quit and Pick-A-Pay Games

10 Feb

What, exactly, would cause a highly paid executive to abruptly quit his job? The executive in question is Howard Atkins, former CFO of Wells Fargo (NYSE: WFC). In 2009, Mr. Atkins’ total compensation was $11.6 million. That was up from $4.9 million in 2009 and $5.7 million 2007 – that’s not bad living by any standard. It’s no secret that I have often been critical of WFC and their financial reporting. It’s not that I have a vendetta against the company – as a New Yorker, I don’t run across them in my every day life. I don’t own the company’s stock or options nor do I have a short position. So, why do I continue to shine a light on the company? Quite frankly, I believe the company does not receive the same level of scrutiny that its peers receive. I believe this is likely due to the fact that Berkshire Hathaway (NYSE: BRK.A) is their largest shareholder. As many of you know, investment banking is driven largely by fees received from capital raising and Mergers & Acquisitions. Buffett’s empire of portfolio companies crosses numerous sectors. Those companies, from time to time, find it necessary to utilize the services investment banks. Those services typically result in hefty fees. Why upset uncle Warren? Just a thought, but I like conspiracy theories. Continue reading