http://www.the-numbers.com/market/distributor/Sony-Pictures

If you take out the three Spider-Man movies, Sony Pictures looks lackluster and I think they already milked as much as they could out of the franchise. What hit is going to replace it?

And I haven’t looked at the music business, but that’s definitely in worse shape. Sony hasn’t had a hit there since Thriller. How do you make money selling music anyway?

I don’t think a carve out of the entertainment business is going to be too beneficial to Sony. Sony’s problem is really simple: it doesn’t make products that people care for.

Of course this wasn’t always the case. Sony invented the Walkman and everyone loved it. They made great Trinitron televisions. The PlayStation did fantastically well for two generations.

Now is a completely different story. 4K television? What’s the point of having a television that has 4x the resolution of HD, if it requires me to download 4K content? That’s retarded. It can upscale 1080p BluRays to look slightly better. That’s retarded.

Why would I buy a Vaio when comparable PCs with decent industrial design (Lenovo) are available at lower price points?

Why would I buy a Sony digital camera? Who buys standalone cameras anymore?

This is a horrible business.

I have better trades on in Japan. Similar stuff to our 200%+ trade in Digital Garage. I agree with Dan Loeb’s bullishness on Japanese stocks, but there’s better stuff than Sony.

Beal started his own bank and bought up distressed assets, usually at the bottom of the business cycle. He’s made a lot of money doing so.

WTF is a numbers theorist? Apparently Beal is a really good poker player, too. Unfortunately for him he got the Phil Ivey experience–losing $16 million or so–and vowed never to play poker again. http://www.cardplayer.com/poker-news/834-phil-ivey-vs-andy-beal-out-16-6-million-beal-heads-home

In the Imperial deal, Beal is putting up no more than $300 million to get death benefits of over $1 billion over 15 years plus 5.5% interest on the money drawn by Imperial. That’s a fantastic deal in absolute terms and exceptionally fantastic given the low risk. The kicker is that Beal Bank is a deposit-taking institution and their cost of capital is probably 1% per year. They’re earning a huge spread on the loan, not to mention their participation in the death benefits.

IFT is essentially putting up $500 million to get upside of $2 billion. Shareholders have a great deal, too. Their average cost of capital is under 5%, and their assets will earn IRRs above 20%. IFT is earning an enormous spread on a larger amount of capital than Beal Bank.

Imperial is now comprised of two assets. First is White Eagle, a portfolio of life insurance policies with a net death benefit of $2.28 billion. There are 459 insureds within White Eagle. By the time the last person in the portfolio dies, White Eagle will have collected $2.28 billion from the insurance carriers. The first $76 million goes to Imperial. The remaining $2.204 billion is split 50/50 with Beal Bank. So $1.102 billion will belong to Imperial.

Imperial’s second asset is a portfolio of 177 life insurance policies with a net death benefit of $820 million. All of the upside of this portfolio belongs to Imperial.

In simple terms, the upside to Imperial totals just short of $2 billion in cash ($76 million + $1.102 billion + $820 million). To earn that $2 billion, Imperial is going to have to pay the insurance companies premiums every year (about $60 million in 2013). Premiums will gradually decline in the next few years as insureds in the portfolio die; at some point premiums will drop off dramatically as deaths accelerate. I estimate that premiums paid plus interest on the Beal loan will total around $500 million over the next decade.

So $2 billion in cash minus $500 million needed to fund the investment leaves Imperial with $1.5 billion of upside. Operating costs going forward will be de minimis. In fact the great majority of Imperial’s operating costs arise from payroll expense in the structured settlements business. I have heard that Imperial can sell the structured settlements business for $1 per share. Today you can buy Imperial at a $129 market cap. The terminal value is $1.5 billion, over 10x current market cap.

If the insurance carriers try to pull anything, Andy Beal has Imperial’s back. You don’t want to mess the guy. He’s worth $8.5 billion and I think he could hire some good lawyers.

I’m not afraid of expenses getting out of hand… Phil Goldstein is Chairman of the Board. The CEO, Tony Mitchell, also has $6 million, probably the majority of his net worth, invested in IFT so I trust him.

In closing, my suggestion to IFT (as its most concentrated shareholder) is that we treat the 636 insureds to a free one-month cruise to the Bermuda Triangle. And what meals should we serve them? McDonald’s of course! Supersize them! Feeding them burgers and fries every day for a month should get us $2 billion in no time. And if the cruise ship happens to disappear in the Caribbean? Well, even better.

I kid. I kid…….

Good to hear investors talk about the good old days and clearly identify where they had a competitive advantage. James Dinan had a guy at the SEC reference room who would fax over filings a day before most people had access to them. Today that informational edge is gone thanks to EDGAR.

“Today, quite frankly, while risk arbitrage continues to be one of the main areas that York invests in, it’s of much smaller influence today. The economics are not as good.”

http://mises.org/daily/6361/Monetary-Origins-of-the-Poker-Bubble

It’s really cool to watch how humans get interested in fads and then watch all the interest disappear. That the poker bubble occurred during the housing bubble makes me think that human folly tends to happen all at once, when animal spirits are high.

Where are we in the cycle of animal spirits now? That’s a billion-dollar question.

“Outperforming the market with low volatility on a consistent basis is an impossibility,” Soros said. “I outperformed the market for 30-odd years, but not with low volatility.”

This is coming from a guy who told Stanley Druckenmiller he was being stupid because a position was only $1 billion (which at the time was probably 20% of AUM). 20%? You call that a position? Double it!

How many fund managers today would size one trade as 40% of the book? He’d have to be young and foolish… but not too foolish.

NovaCopper was spun out of NovaGold in April 2012. The stock has dropped by half since then, and for what appears to be good reason. Here are Risk Factor highlights from the registration statement:

We have not defined any proven or probable reserves and none of our mineral properties are in production or under development.

Even if one of our mineral projects is determined to be economically viable to develop into a mine, such development may not be successful.

We have no history of production and no revenue from operations.

We may not have sufficient funds to develop our mineral projects or to complete further exploration programs.

Actual capital costs, operating costs, production and economic returns may differ significantly from those described in the technical report for the Ambler Project.

We will incur losses for the foreseeable future.

Why would anyone want to invest in this company? The easy decision is to sell.

But then again, here is a list of shareholders:

Paulson, Baupost and York. All smart guys. My guess though is that they all were originally shareholders of the parent and ended up receiving NCQ after the spin.

Does anyone out there have something to contribute?

“In 2012, we think total new debt incurred is somewhere between 30 to 40% of GDP.”

“In China, the GDP comes from production, not from final sales. So if a builder puts up a condo, it counts as GDP. It doesn’t have to be sold. Back in 2009, China was probably putting up about 10 million condos a year and selling through about 4 million. That number by late 2011 had dropped to about 2 million annualized. It’s bounced back to about 4 million now we think. The problem is they’re now constructing about 20 million units. The fact of the matter is that the unsold inventory is just building, despite there being a blip back up in sales.”

“Two years ago I said buy Miami, sell Beijing. I think this is still a valid strategy.”