I’ve been debating in my mind how I would write this piece. In the end, I just decided that I would tell it plain. Part of investing is losing money. There is a connection between willingness to lose money in the short run, and ability to make money in the long run. My experience has been that if you don’t take the risk of losing significant money, you don’t make significant money. Another way of saying it is that if you don’t blow one up every now and then, you’re not taking enough risk.
With that introduction, let me present my 10 worst losses since starting this strategy 7.7 years ago, beginning with the worst, and moving to progressively lesser losses. These ten losses comprise 55% of the total dollar value of losses since I started this strategy.
Deerfield Capital
What can I say?? My original thesis was that Deerfield was a mortgage REIT that did it right.? In spite of my negative real estate views, I did not think that the risk would extend all of the way to prime mortgage and Alt-A (no stated income) collateral.? Alas, my training as an actuary should have told me to avoid companies dependent on market confidence to maintain financing.? As the repo haircuts rose, free assets diminished, aand they had to collapse their balance sheet.? My main mistake was thinking that repo haircuts couldn’t get that high.? I was wrong. I finally sold when I thought the likelihood of insolvency was significant.
YRC Worldwide
I got in this one too early.? My industry models sometimes flash “cheap” when things will get cheaper.? Sometimes I have the sense to remember that.? This time I didn’t.? YRC has more debt than I would like, but it has a huge amount of upside when the economy turns.? Waiting for that turn could be fatal, but I continue to do so.? One other note: for the remainder of this piece — where my graphs say exit, it does not mean sale. For companies that I still owned at 4/30/2008, I market them down as “exited” because that is where my calculations end.
The jury is out on this one.? As with all of my investments, I try to analyze a company versus its likely future prospects.? I don’t care a lot about the past, I just try to analyze current price versus future prospects.? My estimate of future value warrants continued inclusion in the portfolio.
Dynegy
Catch a falling knife?? When there is fraud, I give other investors a pass.? As for me, I should have known better.? Cash flow was light relative to earnings — not a good sign.? Another warning sign ignored: avoid managements that are self-absorbed.? Dynegy and their investment banks had to kick in to fund a settlement.? (Note: it is only worth going through the settlement process when a deep third pocket gets tagged.? Most fraud cases are broke, and only the lawyers do well.)
I’m afraid that friends influenced me here; a number of people in my investment department owned Dynegy, and when I bought, e comment was “Welcome to the Dark Side.”? Dark? — better to say red ink. I can’t prevent being taken in by fraud, but I can minimize it if I focus on companies with strong cash generation.? It’s hard to fake free cash flow.
Jones Apparel Group
Again, my industry models flashed “Cheap” too soon.? Everything depends on whether Jones can turn their operating businesses around.? I think they have a chance, and given the recent sale of one of their subsidiaries, there is enough cash.? That said, I tend to worry when debt levels verge on high, and the debt maturities are near.? There is a new CEO, who was the old CFO.? At present, I still think there is value here, but I will take my loss before the end of 2008 if earnings results don’t turn.
Cable & Wireless plc
One of my ways of trying to make money is to buy strongly capitalized companies in an industry that is having troubles.? Well, the strength of C&W’s balance sheet was overstated; there was a bit of a fraud issue there.? And, I should have listened to Cody Willard, who e-mailed me before we really knew me, and said something to the effect of, “Yeah, they have a balance sheet, but no good businesses.? Can’t make money with that.”
Part I Summary
Every loss is stupid in hindsight.? We all get tempted to say “woulda, coulda, shoulda.”? But the same principles that led to my losses also led to my greatest gains.? Two articles from now in this series, I’ll go over those.? But it is best to lead with failure… we learn far more from our failures than our successes.? What are my lessons here?
Don’t play with companies that have moderate credit quality during times of economic stress.
Measure credit quality not only by the balance sheet, but by the ability to generate free cash.
Spend more time trying to see whether management teams are competent or not.
I’ll see if I can’t do better on these concepts in the future.
Just a quick note on how my equity investing is doing — in April I was slightly ahead of the S&P 500, and year-to-date, things are quite good. This is not to say that I haven’t had my share of failures… Deerfield Capital, YRC Worldwide, Jones Apparel, National Atlantic, and Vishay Intertechnology have hurt. But in a portfolio of 35 stocks, even large percentage whacks get evened out if the stock picking on the remainder has been good enough. And, for me it has, though the successes are not as notable as the failures.
As an investor, I am a singles hitter, but my average is high, and strikeouts low. I have my failures, but the eight rules, which are my risk controllers and return generators, protect me. At least it seems that way for the last 7.7 years, but I know enough that even if the principles are right, they are no guarantee for the next day, year, or decade. “The markets always find a new way to make a fool out of you,” and so I encourage caution in investing. Risk control wins the game in the long run, not bold moves.
So, I keep plugging on, adapting to what I think the market will reward in the future, and ignoring the past for the most part.
Monday, at about 10AM, I sold my holdings in Deerfield, Deutsche Bank, and Royal Bank of Scotland.? I did it bloodlessly, realizing that Deerfield is the largest loss I have ever taken.? With the proceeds, I bought two placeholder assets that I will hold until the next reshaping (coming in a month), the Industrial (XLI) and Technology (XLK) Spiders.? By doing that, I cut the majority of the links that I had to the leveraged lending economy, which is collapsing at present.? When I saw that haircuts on repo for prime agency collateral had been raised for the second time, I threw in the towel, because too many things have broken that even I did not expect would break. (Even the haircuts on Treasuries have risen.)
With Deerfield, I made the error that if the collateral was very high quality, it could survive, even at high levels of leverage.? In a true panic, that does not matter.? All that matters is whether your leverage is low enough to allow you to survive the credit bust, and that you can do that over your financing horizon.
Financing horizon?? By that I mean how often your solvency gets measured.? For many mortgage REITs, that is a daily, weekly, or monthly phenomenon.? The longer the period, the better the odds of survival.? Short repo financing is by its nature is a weak financing method in a crisis.? The day you cross the line (margin inadequate) the brokers move to liquidate.? Given that some other managers may have been more aggressive, your excess capital can disappear, as more aggressive mangers miss margin calls, and the pressure of their liquidations, forces your more conservative positions down, and you have to liquidate also.
Now, think of a life insurance company, a long-tailed casualty insurer or a defined benefit pension plan.? If they buy AAA whole loans, or prime mortgage collateral, they can hold that position for 3+ years without worry.? Their liabilities aren’t going anywhere.? They know what they will be able to hold the investment through the panic period.? There are still questions over what the best time to buy is, but with many large companies or plans, the optimal thing to do is to suck in a little bit each day, quietly, when the bonds are cheap.? You won’t get the exact bottom; no one does, but you will do well.? My own example is buying floating rate trust preferreds back in late 2002.? Bought a 2% position over two months for my life insurance client without disturbing the markets.? My client cleared a minimum of 10% on those investment grade bonds within a year as the panic lifted.
Accounting vs. Financing
Now, there’s a lot of talk about fair value accounting standards, and how they are adding to the volatility at present.? They are adding to the volatility, but they have less effect than the way things get financed.? Unless the fair value accounting leads a company to violate a debt covenant, typically it does not have that much effect, because it does not change the pattern of cash flows that the company will generate.? Short term financing, where the portfolio’s “market value” gets measured on a daily basis has a much bigger impact, because as prices fall, liquidation of assets can feed a collapse of prices.? Or consider this article from Going Private, which cites an article from Financial Crookery, which highlights an attempt by Merrill Lynch to avoid having to pay out cash on a putable bond.? In order to do that, they make the bond more valuable, so that it won’t be put.? But this isn’t an accounting issue.? It is a financing issue.? Merrill doesn’t want to part with cash now, so it makes its future financing schedule more difficult.? It is a complex way of selling off a bit of the future in order to bail out the present.
Now, I disagree with The Economist article that spawned those posts as well.? There is a better way.? In place of the four common financial statements (Income Statement, Balance Sheet, Cash Flow Statement, and Shareholders Equity), have six.? The two additional statements would come from having a amortized cost income statement, and a fair value statement, and then, the same for the balance sheet.? It would not be a lot of extra work, because all of that data has to be gathered now already.? It would just create two different ways of looking at a financial entity.? One views it as a buy-and-hold investor (amortized cost), and the other as a trader (fair value).? The interpreter of those statements could decide which is more relevant.
I proposed this to an IASB commissioner 2-3 years ago, and she was horrified at the idea.? Two income statements?? Two balance sheets?? What confusion.? I pointed out to her that every financial statement is designed to answer one question.? Bond investors have to rearrange the data to do their analyses; we could create an EBITDA statement to make life easier for them, but we don’t.? The two statements types define two different ways of looking at a firm.? Each is more valid in different situations.
Now, for utility and industrial firms, these distinctions usually don’t matter much, but they do matter for financial firms.? There could be a seventh statement added there, which life insurance companies calculate for their regulators.? All financial companies should have cash flow testing done over the greater of the life of their assets and liabilities, over a wide number of interest rate and credit scenarios, calculating the present value of distributable earnings, to show where they are vulnerable.? They should publish the assumptions and results, and then let the market stew over them.
Now, for my actuarial friends, this would be the “Actuarial Full Employment Act.” Life Insurers control risk not by looking at short term movements in market prices, but through long-term stress testing.? It is no surprise that the insurers are doing much better than the banks in this environment.
I always try to separate my views of what I think the FOMC will do, versus what the FOMC should do. It’s hard for me now, because I think the FOMC is pursuing the wrong strategies. The yield curve is steep enough now, that further easing will not yield much incremental benefit. Further, a loose monetary policy only stimulates healthy areas of the economy that can absorb more borrowing, not areas with impaired balance sheets.
But what will the Fed do? Loosen. Aggressively. Don Quixote would be proud. They will make the TAF permanent and big, and the discount window will be a relic of a simpler age.
Let’s think of the short run versus the long run. In the short run, the FOMC wants to get the economy moving again, and is willing to tolerate negative real interest rates in order to do so. The Fed funds target is already 1%+ below the CPI, and the argument is over whether the next move will be to loosen 50 or 75 basis points. Negative real interest rates promote goods and services price inflation. (I don’t know about everyone else, but when filling up my gas tank nears $100 I begin to worry. Eight kids — 15-seat van, 10 cylinders…) In the long run, the FOMC will have to deal with price inflation. Even with the current yield curve, I can tell you that goods price inflation will worsen, leading to monetary tightening that will be painful, or no tightening, and inflation that rivals the 70s.
The Fed could target lending to the weak areas of the economy, while leaving monetary policy alone. That would invite charges of favoritism, which is why it won’t happen.
So, in my opinion, asset deflation will persist, and goods price inflation will increase. As for me, I will likely sell my positions in Deerfield Capital, Royal Bank of Scotland, and Deutsche Bank on Monday, replacing the exposure with an index for now. I have agonized over the seemingly cheap capital markets names for some time now, and I have been the loser there. I will return, but for now, it is safer to have no investment banking or mortgage exposure. The asset deflation is hitting them hard, and lending is contracting.
Well, it looks like the collateral haircut for repo financing of agency mortgages has gone up, from 3%, to somewhere between 4 and 5%.? That may account for some of the panic, especially regarding Carlyle.? It also may mean that Deerfield Capital is kaput.? I am presently long, but I may sell next week.? This company would be my personal biggest blunder ever, and my apologies to those who were influenced by me to own the company.
Disclaimer: David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent “due diligence” on any idea that he talks about, because he could be wrong. Nothing written here, or in my writings at RealMoney is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, “The markets always find a new way to make a fool out of you,” and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves.
Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here or on RealMoney is meant to be formal “advice” in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.
My disclaimer dates back five years.? It’s at the bottom of my blog, and is there for a reason: I get things wrong.? Now, I like to think that I get things right more often, but let’s just look at the gritty downside for a moment.? I wrote a series of articles at RealMoney on using investment advice.
I wrote these with Jim Cramer in mind.? Now, I like Jim Cramer; he says a lot of bright things.? But when you talk about so many things, and put out so much content, particularly on TV, you have to be careful.
I don’t have 0.1% of the exposure that Mr. Cramer has, but I care what happens to my readers.? (I think Jim does too, but the shell has to get hard when one is that exposed, or, you’ll give up speaking and writing.)? So, when I make notable errors, it hurts me double.? I usually have my cash on the line when I write, or at least, my reputation, which is more valuable (you only get one of those).
Today was my worst relative performance day in a long time.? Deerfield Capital, National Atlantic, and Gehl, all did badly.? I bought more Deerfield today, and I’ll put out a post on my thoughts soon.? That said, March is off to a bad start with me, after a tremendous first two months of the year.
So, I am eating my crow, lightly seasoned, and with humility.?? Always do your own due diligence when you read me, because I get it wrong now and then, at least in the short run.
There are times where I feel the intellectual well is dry, and I come to my keyboard and say, “What do I write tonight?” This is not one of those times. I have too many things to write about, and not enough time. I’ll see how much I can say that is worth reading.
1)Jimmy Rogers (I?ve met him once ? a nice guy) tends toward the sensational.There is a grain of truth in what he says, but the demographic situation in China is worse than that in Japan, which is why they Communist leadership there is considering eliminating the one-child policy:
I gave a talk last October, which included a lot on the effects of demographics on the global economy:
Now, eliminating the one-child policy won?t do that much, because most non-religious women in China don?t want to have kids. In developed societies, once women don?t want children or marriage, no level of economic incentive succeeds in changing their minds.
This isn?t meant to be social commentary.The point is that there is a global demographic shift of massive proportions happening where there will be huge social pressures on retirement/eldercare systems, because the ratio of workers to retirees will fall globally.China will be affected more than most, and the US less than most (if we can straighten out Medicare).
The economic effect will feel a little stagflationary, with wage rates improving in nominal terms, taxes rising to cover transfer payments, and assets being sold (to whom?) to fund retirements and healthcare.There need not be a crisis, like a war over resources, in all of this, but it won?t be an easy next 30 years.One thing for certain, when you look at labor, capital, and resources at present, the scarcest of all is resources.Again, resource price inflation.At present, capital is scarcer than labor, but that will flip in the next 30 years.
2) A few e-mailers asked for more data on how I view monetary aggregates. On monetary aggregates, my view of it is a little different than most, and I take a little heat for it. Ideally, the lower level monetary aggregates indicate a higher degree of liquidity; greater ease and shorter time of achieving transactions. The other way to view it is how sticky the liability structure is for the banks. Demand deposits, not sticky. Savings accounts, stickier. Money market funds, stickier still. CDs, even stickier.
As the Fed changes monetary policy, there are tradeoffs. Willingness of the public to hold cash, versus opportunity at the banks to make money from borrowing short and lending longer, versus banking regulators trying to assure solvency.
That’s why I look at the full spectrum of monetary measures. They tell a greater story as a group.
3) No such thing as a bad asset, only a bad price? No such thing as a bad asset, only a mis-financed asset? Both can be true. What we are experiencing today in many markets is that many assets were financed with too much debt and too little equity. In the process, because of the over-leverage allowed for high returns on equity to be generated from low returns on assets, the buyers of risky assets overpaid for their interests.
This has taken many forms, whether it was Subprime ABS, CDOs, SIVs, Tender Option Bonds, the correlation trade, etc. Also the borrow short, lend long inherent in Auction Rate Securities, TOBs, and other speculations that make wondeful sense occasionally, but players stay too long.
Rationality comes back to these markets when “real money buyers” appear (pension plans, insurance companies, wealthy dudes with nose for value), and these non-traditional buyers soak up the excess supply of investments that are out of favor, and do it with equity, at prices that make the unlevered return look pretty sweet. This is how excess leverage gets purged from the system, and how pricing normalizes, with losses delivered to the overlevered.
4) As I said in my post last night, there is value in the tax-free muni market for non-traditional buyers. Is this the bottom? Probably not, but who can tell? Smart buyers will put a portion of a full position on now, and add if things get worse. Don’t put a full position on yet. I eschew heroism in trading, in favor of a risk-controlled style, where one makes more on average, but protects the downside. It is possible that the drop in prices will bring out more sellers, but I think that there will be more buyers in the next week. That said, the leveraged buyers need to get purged out of the muni markets.
Interesting to note on Barry’s blog that he has noted that the “low quality” trade has been so stunning over the past three years. I thought Richard Bernstein at Merrill and I were the only ones who cared about this stuff. But now for the bad news: the trade won’t be over until high yield spreads start blowing out, and presently, they show no sign of doing that. Why? There haven’t been many defaults, for one reason. The few defaults have been for the most part in auto parts and airlines. There’s no systemic panic.
Beyond that, there’s a lot of capital to finance speculative ventures, and to catch bad ones when they fall. That means that marginal ideas are getting forgiveness as they get refinanced.
The demand for yield is huge, which drives the offering of protection in the credit default swap market. Fund of funds encourage hedge funds to seek steady income, which makes them tend to be insurers against default risk, rather than speculators on possible default.
I know that I wrote “Default Cycle Will Turn Nasty in 2007;” I take my calls seriously, because I have money on the line, and many of you do too. I think the low quality trade, absent a market blow-up, won’t outperform by a lot in 2006, but will still outperform. Something needs to happen to make credit spreads not look like a free lunch.
My best guess of what will do that is the seasoning of aggressive corporate bond issuance in 2004 and 2005. Bad credit be revealed for what it is, and even the stocks of low quality companies that eventually survive will get marked down for a time, as strong balance sheets get rewarded once again.
Position: none
Then later, in early 2007, I wrote: I was wrong on underperformance of junk bonds. Tight levels got even tighter, with an absence of significant defaults. Junk bonds led the bond market in 2006. In 2007, I don’t expect a repeat, but I do expect defaults to start rising by the end of 2007, leading to a widening in spreads and some underperformance of junk bonds. The real fun will come in 2008-2009. Corporate credit cycles last four to seven years, and the last bear phase was 2000-2002. We’re due for a correction here.
Well, I got it close to right. Timing is tough.
6) Would you pay a high enough price to buy a short-dated TIPS with a negative real yield? Yes you might, if you were hedging against nominal Treasuries, with the CPI running ahead at 4%, and short-dated (5 years and in) nominal bonds at 2 1/2% and lower. As it is, the market seems to be hesitating at going negative, but in my opinion it will, until the concern of the FOMC changes to price inflation.
7) Wilbur Ross didn’t get rich by being dumb. He didn’t buy stakes in MBIA or Ambac, but in one of the two healthy firms, Assured Guaranty. Better to take a stake in the healthy firm in a tough market; they will survive, and write the business that their impaired competitors can’t. This just puts more pressure on MBIA and Ambac, and provides a lower cost muni insurance competitor to Berky.
8 ) MBIA and Ambac are playing for time, and I don’t mean that in a bad way. They are willing to shrink their balance sheets, and write little if any structured business, pay principal and interest in dribs and drabs, and pray that S&P and Moody’s give them the time to do this, and keep the AAA/Aaa intact. It could be three years, and stronger players (FSA, BHAC, AGO) will absorb their non-structured markets. But it could work. If I were Bill Ackman, I would take off half my positions here. Just a rule of thumb for me, when I am managing institutional assets and I become uncertain as to whether I should buy or sell, I do half, and then wait for more data.
Remember, many P&C insurers have been technically insolvent (in hindsight) during the bear phase of the underwriting cycle. They survived by writing better business when their balance sheet was in worse shape than commonly believed. The financial guarantors have a unique ability to wait out losses.
9) There have been all sorts of articles asking whether XXX institution is “too big to fail?” Well, let me “flip it” (sending my pal Cody a nickel for his trademark 😉 ) and ask, “Is the US too big to fail?” There’s a reason for my madness here. “Too big to fail” means that the government will bail out an entity to avoid a systemic crisis. Nice, maybe, but that means the government raises taxes to do so (nah) or issues debt that the Fed monetizes, leading to price inflation. Either way, the loss gets spread over the whole country.
What would a failure of the US look like? The Great Depression springs to mind. Present day Japan does not. They are not growing, but they aren’t in bad shape. Another failure would be an era like the 1970s, but more intense. That’s not impossible, if the Treasury Fed were to rescue a major GSE via monetary policy.
10) I have had an excellent 4Q07 earnings season. As of the end of February, I am still in the plus column for my equity portfolio. But, into every life a little rain must fall… after the close on Friday. 🙁 Deerfield Capital reported lousy GAAP earnings, and I expect the price to fall on Monday. Now, to their credit:
They reduced leverage proactively, and sold Alt-A assets before Thornburg blew.
They moved to a more conservative balance sheet. It is usually a good sign when a company sells its bad assets in a crisis.
I would expect the dividend to fall to around 30 cents per quarter. I should have more to say after the earnings call. They are becoming a little Annaly with a CDO manager on board (might not be worth much until 2010).
I may be a buyer on Monday. Depends on the market action.
That’s all for this evening. Good night, and here’s to a more profitable week next week.
I didn’t feel well today, but my broad market portfolio did better than me. I probably could not have picked a worse day to do my reshaping, but here are the results:
Sales:
Aspen Holdings
Flagstone Reinsurance
Redwood Trust
Mylan Labs
Lafarge SA
Purchases:
Reinsurance Group of America (old friend, cheap price)
Honda Motors
Rebalancing Buys:
Valero
ConocoPhillips
Vishay Intertechnology
Rebalancing Sale:
Deerfield Capital
I’m not done. My moves today raised cash from 5% to 10%, and trimmed positions from 36 to 33. I have room for two more ideas, and am working on where to place cash. My timing of buys and sells today was good — not that that is a key competency of mine by any means.
Aside from the sale of the reinsurers, which were just cheap placeholders, the other positions were not as relatively cheap as they once were. RGA and Honda are quality companies selling at bargain prices. If I had more names like those, I would buy them all day long.
Away from my broad market portfolio, I raised my equity exposure in my mutual funds fractionally today. Time to rebalance.
PS — I can’t remember another day quite like this, where the late negative to positive move was so pronounced.
In the past, when I hit a major downdraft in the market, I find myself debating whether I should reduce the number of positions in my portfolio, or shrink the mean position size.? The latter is the easier choice, which is why I take the former, and shrink the number of positions, forcing me to eliminate marginal names in the portfolio.
Today I added to Nam Tai Electronics and Deerfield Capital, bringing my over all cash position down to 8%.? As I work through my reshaping, I expect my cash level to decline further, but I would probably liquidate one of my 35 stocks without replacement to help fund the reshaping and rebalancing.
At times like now, this is a process that hurts, and sometime next week, I will announce my portfolio shifts.? That said, the portfolio has held up better versus the market recently.
Three companies of mine reported after the bell, Flagstone, Deerfield, and National Atlantic. I’ll take them in that order.
Flagstone beat handily, as I would have expected a property-centric reinsurer to do in this environment. Let’s see what optimism tomorrow brings. At 96-97% of book value, it seems cheap, but I can’t imagine property reinsurance rates will be that robust next year.
Deerfield is a little more tricky. They took a loss due to mark-to-market events in their portfolio. REIT taxable income is reasonable at 50 cents/share, and much of the writedown is a GAAP anomaly that shaves $1.20 off of the current book value. Economic book value is $11.84, which provides some support to the stock. The dividend of 42 cents is still intact. There is reasonable excess liquidity, even after the increase in repo margins during the third quarter. Let’s see what the market thinks.
Now for the problem child, National Atlantic, which takes an 83 cent loss. Here’s the main offending paragraph from the press release:
“For the three months and nine months ended September 30, 2007, reserves have increased by $17.6 million and $9.4 million, respectively, principally as a result of the strengthening of the reserves for bodily injury claims. During the third quarter it was determined that the Company’s policy related to claims handling procedures and reserving practices were not applied consistently, primarily within the bodily injury claims unit. As part of the resolution of this matter, the Company retained an independent claims consulting firm.”
For a company the size of National Atlantic, these are huge reserve changes, particularly for a short-tail line like auto. What I am about to write here is only a guess, but this likely was building up since sometime in 2006. One of the reasons I am willing to be a little more bullish on short-tail insurers is that it is a lot harder to get the reserve wrong. Looks like I am getting one of the rare events that teaches greater caution. (That said, my average cost is $8.85, so I’m not that badly hurt.) Given the large reserve change this period, ordinarily, the decks are cleared for future periods, but who can tell for sure? Also, this places the combined ratio since 2002 at 103.7%. It makes me think that the company will do well to eke out any underwriting profit.
I’ll be listening to the call tomorrow. What’s the endgame here? Given the marginal ability to earn underwriting profits, perhaps the company would best be reconciled by merging with another firm. That wasn’t my opinion over the past three years, but it is my opinion now. There are many firms that could have an interest at the right price, which probably approximates the book value of $13.28. That said, many of them may have kicked the tires already and passed, some probably thinking that a bid at book value would not be honored. All I can say is, give it a shot. Rumor is that Commerce wasn’t offering more than book, so if you want a greater presence in NJ personal lines, it may be available at a reasonable price.
