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First the News:

he chief executive of Simon Property Group Inc (SPG – News) on Thursday said a plan by management of General Growth Properties Inc (GGP – News) to emerge from bankruptcy lacks certainty despite new financial backing.

Simon, the largest U.S. mall owner, last month offered to buy General Growth, the second-largest, for $10 billion in a plan that had support from many General Growth unsecured creditors.

But General Growth on Monday set forth a competing plan to emerge from bankruptcy, under which William Ackman’s Pershing Square Capital Management and fund manager Fairholme Capital Management would invest up to $3.93 billion.

That plan has backing from Canada’s Brookfield Asset Management Inc (Toronto:BAMA.TO – News). Pershing Square is General Growth’s largest shareholder, and Fairholme its largest debtholder.

General Growth had earlier proposed to split in two companies, in a plan under which Brookfield would have invested roughly $2.63 billion in exchange for a 30 percent stake.

That plan also called for General Growth to sell about $1 billion of assets and raise $3.3 billion of equity.

David Simon, the chief executive of Simon Property, on Thursday said the revised plan retains potential pitfalls for General Growth shareholders.

“The first plan had a lot of uncertainty to it, in terms of how it was going to impact shareholders,” Simon said at a New York University conference. “Their added plan eliminates some uncertainty, but not all of it.”

This is the same argument Simon & Co. used in front of the court regarding the unsecured creditors. The argument was that the BAM deal that paid unsecured creditors in cash was to “uncertain” for them and that Simon’s plan was better because it provided for a 100% “certain” cash payout. Now, they of course failed to recognize/acknowledge that at the time GGP’s unsecured debt was trading at or ABOVE par meaning those unsecured creditors who wanted the “certainty” of cash could at that time sell that debt for price equal to or MORE than what Simon was offering them.

Now we turn to the shareholders and we have the same flaccid posturing. Simon is saying his $9 offer ($6 in cash , $3 in GGO) is better than the $15 offer BAM/FAIRX/Pershing (BFP) has put forth because the BFP deal has some uncertainty in it. The deluded thought process is that since the BFP deal is an all stock one to shareholders, the $6 in guaranteed cash he is offering is superior. This fails for the same reason his unsecured creditor argument did. Those shareholders who do not like the “uncertainty” in the BFP deal are free to cash out at $14+ a share today, a 133% premium to the “certain” cash Simon is prepared to pay them and a 64% premium to the “uncertain” $9 he is offering ($3 of that is not “certain”). This is the new “fuzzy math” I guess where $6 > $14.

What Simon either doesn’t realize or does and is just spewing these infantile rants to see his name on a press release is that those unsecured creditors and shareholders who are still holding those positions OR entering positions now are doing so because the WANT to hold shares in a freshly emerged standalone entity called GGP/GGO, not because they want a cash out. Anyone who wants their cash is doing so at prices laughing higher than that David Simon is offering him…

The ONLY person David Simon’s deal is better is David Simon and his shareholder folks, period. His statements that is is better for GGP shareholders or debtholders is nothing short of rank dishonesty and he knows that.

Note to the media: Shame on you for simply parroting back these arguments on both TV and in print. You are doing your viewers/readers a massive disservice. Do a little homework and look into it at a level even just below the surface. You might be surprised what you find. Actually I know you will since you have been dead wrong on this since $.42 a share a year ago. No reason to expect anything different now. Do you really wonder why you are hemorrhaging market share to blogs?

Maybe anyone of you want to call David Simon and ask him about ANY of the points raised here?

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The bottom line continues to be that the loan portfolio is increasingly less meaningful to investors and the brokerage business is slowly taking precedence.

Here it is:
etfc presentation

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We have talked a ton about this here, reducing the “noise” you are subjected to. For myself, it is a rare day I watch any of the financial networks and when I do it virtually always is Bloomberg as the tone is more conversational vs confrontational screaming. Their interviews also tend to be longer than 45 second giving those on the show the ability to provide a coherent thought process rather than spewing talking points at full volume.

This is the beauty of the twitter/stocktwits combination. It is an instant filter that allows each of us to eliminate as much or as little noise as we want and receive that which interests us or is in our area of focus. The rest never reaches us. It gives us the best of the TV in that we get instant news and information and eliminates the worst, the lemming investing mentality Hussman speaks to below.

In a strange way it actually encourages more independent thought in that I follow people I respect for a wide variety of reasons. When they post something of interest, I investigate it more. If it contradicts what I think, I pay it more attention because I am familiar with them. Contrast this to the TV in which we know very little about most folks on there so contradictory thoughts can be easily dismissed with a “he is a dip shit” comment. The people I follow IMO aren’t so I do pay attention when they think differently than me. This causes me to dig deeper to either confirm or alter my thoughts on a subject.

I can also get a question answered on a subject usually in less than 5 minutes, no matter how arcane.

For reasons those alone the stocktwits medium is invaluable.

From Hussman:

I’ve thought about this a great deal, and I suspect that just as the experience of patients is determined by the quality of information they get from their doctors, the behavior of investors is likely to be only as sound as the quality of the discourse and advice they receive from investment professionals. In reflecting on why the past 15 years have been so riddled by irresponsible speculation, it is impossible to ignore the rise over that same period of widely-viewed financial programming that is equally riddled with cartoonish content that encourages short-term thinking and speculation (buy-buy-buy! sell-sell-sell! boo-yah!). When we observe a clear change in the quality of analysis on the financial news, and the departure of its more speculative elements, I suspect we’ll also see greater emphasis on fundamentals and better allocation of capital, while speculation will be less effective in the face of overvaluation.

During the late-1990’s bubble, it struck me that the discourse on CNBC was remarkably similar to the sort of discourse that I had read from news archives preceding the 1929 crash. As I wrote at the time, what was surprising was the extent to which investment professionals, who ought to have known better, were fully endorsing valuations that were clearly inconsistent (at the time, and certainly in hindsight) with prospective cash flows – even if one assumed that economic activity, earnings, and dividends would achieve and sustain the highest growth rates ever observed in history.

Many investment professionals have developed a habit of forming expectations based on nothing more than extrapolation of short-term trends in the data, even when those extrapolations are inconsistent with market history or well-established economic relationships. This was a key element in creating the housing bubble – no price was too high and no bubble was recognized, because all that mattered was that prices were rising. The focus of analysts on the short-term ups and downs of economic and earnings reports has become such a mainstay of financial news that it’s not at all clear to me that investors even recognize how devoid the current financial discourse is of real analysis.

To analyze a company or the market, you have to think carefully about the long-term stream of cash flows that investors actually stand to receive, and how they should be discounted to arrive at an appropriate price. Instead, the only question today is whether earnings and economic reports are delivering “surprises” versus what “the Street” estimated the day before the data was released. The quality of earnings, the cyclicality of profit margins, dilution from option and stock grants, the implied total return reflected in the stock price, the return on retained earnings, cost of entry, competitive structure, market saturation, the potential for organic growth from reinvested capital – all of those things matter over the long run. But to watch a half hour of CNBC today is like watching an old episode of Gomer Pyle (“Well, surprise, surprise, surprise!”).

As Benjamin Graham and David Dodd wrote following the Great Depression (Security Analysis, 1934),

“The ‘new-era’ doctrine – that ‘good’ stocks (or ‘blue chips’) were sound investments regardless of how high the price paid for them — was at bottom only a means for rationalizing under the title of ‘investment’ the well-nigh universal capitulation to the gambling fever… Why did the investing public turn its attention from dividends, from asset values, and from earnings, to transfer it almost exclusively to the earnings trend? The answer was, first, that the records of the past were proving an undependable guide to investment; and secondly, that the rewards offered by the future had become irresistibly alluring … The notion that the desirability of a common stock was entirely independent of its prices seems incredibly absurd. Yet the new-era theory led directly to this thesis.”.

Read Full Letter Here