Ali Mogharabi

Ali Mogharabi
Contributor since: 2009
$AVID was not really abandoned as it continued to operate efficiently and made clear that the accounting reviews had nothing to do with overstating total revenues. And given where it is at right now, and how it has performed the last 12 months, would you really call it "out of favor"? I pitched this in Dec. '12 (http://bit.ly/1vnEbLM) and in March of this year (http://bit.ly/1vnEbLQ) and certainly provided updates along the way.
By the way, the huge increase in volume that you've seen the last week has been partially due to one of their Directors going on an AVID stock buying frenzy. Look at the SEC filings.
We still like it and will review our valuation this weekend. Fundamentally it remains sound, but from a technical standpoint, the recent spike has created some additional risk.
We've said some things about $IACI before. Think its fair value these days is around $60/sh even w/ a potential spin off of Match ... http://bit.ly/1oOcsl0
http://bit.ly/1oOcsl4
http://bit.ly/1oOcsl8
http://bit.ly/1oOcsBo
and many others we've written on $IACI the last 12-18 months
A lot of risk still associated with BCOR and unfortunately it isn't yet priced in, IMO. In addition, given its very different lines of business, a sum-of-parts valuation is more appropriate for this company ... again, IMO. http://bit.ly/1jF9V8x
Overall thoughts on some of the movie theatre companies, including $RGC, $AMC, $CNK, and $CKEC ... http://bit.ly/1jFb8gi
Thoughts on BCOR ... other links included that'll take you through when BCOR (along with IACI) was initially suggested ... http://bit.ly/1jF9V8x
Absolutely right. Besides Dreamworks, NFLX doesn't have long-term deals guaranteeing it access to popular content. Without popular content, sub growth won't accelarate. Deals such as CW can actually be viewed as 'long-tail' content deals. And long-tail content doesn't bring in new subs, it just helps maintain current subs. And with the cheap subscriber model that NFLX launched initially, it can't go back on its subs and up its prices that easily, as we've seen. And combined with the liabilities that you pointed out, unless it can raise big chunk of capital, it'll be tough for NFLX to acquire rights to popular content at prices that can keep it above water. Lastly, although its long-tail content and/or old content may have fans in the intl mkts, it will likely be facing even more pricing pressure in those markets.
Great article. If it gets cheap enough, yes there may be a buyer. We must keep in mind that there is not really a 'trend' in the content and distribution markets. We've got companies that want to be the one-stop shop and others that are fine specializing in just content production or distribution. With that in mind, there may be a content provider that would be interested, at the right price, of course. TWX would be one. Although I wouldn't say it'd be as excited about getting a service provider such as NFLX (whose service is severly commoditized), as it was when it merged with AOL years ago! :) Overall, I do agree with everything you said. Great article.
Very true; that was Hasting's pitch in 2003!
A couple of things ... nice touch of the Boss in the article (kicking a dog that's been beat too much) ...
Regarding NFLX, its been so successful that its gotten to Hasting's head. He's viewing the argument of how and why he ended up with millions of subs as a chicken or the egg argument. While his 'long-tail' content library helped, what initially drove many to subscribe was popular and well-branded content that he was lucky to get his hands on for cheap early in the 'new media' phase. But as we know, content, the popular content is King. And now he's forced to bow down to the content makers/providers.
The assumption that CW will help maintain his subs and/or lower churn and/or lower SAC and/or drive sub growth rate will turn out to be false. His great model has become commoditized, he has many more competitors that he must take seriously, and ... as usual the winners are the content providers. I'd say if this downtrend continues, the best thing that could happen would be for the company to be acquired by an MSO or telco.
Sorry about RIMM. Looks like it will take a big dump tomorrow.
Digging just a bit deeper into the data, I noticed that since March'10, single family homes (or "1 unit") permits have continued to decline, including in August (released Tues morning). MDUs (multi units) have increased. What does this mean? I'm thinking that builders are now seeing more demand for and valuing MDUs higher. They are assuming that the strong rental mkt will likely get stronger, which is likely at the expense of the single-family homes. So, this data isn't really that rosy. For single-family home permits, they declined in every region except the South, which remained flat.
Seeing similar pattern with the 'authorized but not started' data. Actually the only housing types that grew were the 2-4 units. Both 1 units and 5+ units declined more than 3%. And the 1 units showed decline in ALL regions; month/month and Y/Y.
Data for homes started was better, but this is basically looking back as the permits and authorizations for homes started were given out in prior time periods. But even the better data, supports my negative viewppoint mentioned in the 1st paragraph - multi units growing much more than single family homes. 5+ unit home starts (already started) grew 42.7% in August, compared to a mere 4.3% for 1 unit homes. And the 1unit growth was driven mainly by the West and Midwest regions ... which brings us to the most important thing regarding this data ... INIVENTORY. And those 2 regions are the worst hit during this housing crash. So why are we building more???? No matter how you look at it, with foreclosures continuing to rise, which means shadow inventory growing as banks are more aggressively grabing those homes (only the recently troubled ones), why would building more homes be positive????? Does it create jobs? Sure, but does it put a dent into this wacko unemployment of ours? Nope.
So with these supposed great #s, we may actually be doing more harm to the housing mkt by increasing inventory.
The only thing I would agree with is that there was something positive about the housing starts/permits figures, with permits showing a significant decline. All of this is positive as it limits inventory growth. Such decline combined with a slowdown in foreclosures, which we have not yet seen, could actually create a tiny light at the end of the dark housing market tunnel. But it will take a lonog time for all of this to happen.
Sir, my point was that the 45% bottom-line growth he discussed may have 'justified' the mkt's huge upswing since last year's March lows. But given that such rate won't continue and might just decline significantly, along with additional uncertainty about the stability and growth of the economy going fwd, the fear and uncertainty surrounding the equity mkt can't just be discounted so easily as the author of this article appears to do day in and day out.
Inventory replenishment especially during the first 1-2 months of Q2.
I'm not a well-known economist such as yourself, but I'd like to refute your argument with a simple thought. Highlighting the first half's 45% annual earnings growth is misleading and basically irrelevant as that period's Y/Y comparison is unusually easy. You may remember that everything nearly came to a standstill during 1H '09. For this reason, its less likely that such growth rate will continue during the next six month. In fact, due to no sign of solid revenue growth going forward, that 45% annual rate may actually decline significantly. For this reason I think your conclusion ("tremendous amount of fear, uncertainty and doubt that plagues the market these days" are unwarranted), is based on a faulty argument.
thanks. I have a tendency of rambling on.
Amen! I had to double check this because this great positive spin was created by an economist. I guess economists do make mistakes, eh?
Most of this 30% drop is explainable by running out of eligibility. Remember that claims rose dramatically in a short period of time during the earlier part of the 'great recession'. For this reason, a large chunk can run out of eligibility at the same time. I can't wait to see the jobs picture after August. Maybe the govt will come up with a second Census project. Or the govt will extend those tax breaks and other things to businesses who hire or maintain their employees, beyond the end of this FY which is Sept. Or maybe the govt will just pay everyone for nothing. Or maybe the govt can fix everything. Who knows!
From a technical standpoint, yes, it restores some confidence in the mkt. But you have to admit that 2H '10 will be tough. First, the Y/Y comparisons will be much more difficult as companies will likely not be able to cut costs any further. We're not seeing any strong indication of consumer spending or something that can help increase rev growth for many companies in the 2nd half. Consumer confidence might be going up, but they haven't and will likely not put their money where their mouths are. FedEx as a bellwether, somewhat disappointed. Big banks' earning will be hit by the UK tax. Housing may be dipping as the govt is no longer buying homes for people (at least for the time being). Even if European sovereignties do not face additional difficulties, the fear that they have brought about will take a while to get subdued, which means the European economy may be facing a recession pretty soon. Yes, our economy may not be that much based on Europe, but if the Euro declines (it has taken a break the last couple of days), then it will reduce the much needed European capital to come in the US. Then we have the BP fiasco and sham. So, I'd say yes, technically, the market looks good for the short-term, but in the long-term the market will behave more on fundamentals, which are not looking that great.
Interesting timing of your post with the mkt already up 200+ points.
In addition to ignoring disappointing home figures, I love the way Benny tried to downplay the bad jobs numbers today. First he kept saying that its high because many claims couldn't be filed the last few weeks due to the bad winter storm. And the politicians and his old GS buddies went with that and highlighted it in the media. I guess it would have been better to have possibly nearly 500K annualized claims last week than 496K this week! Thanks Benny. Keep spitting out those "green shoots" for us and your old GS buddies. And then of course he kept saying "low for an extended period." For how long Benny? I get the feeling that the govt is feeding us all right now ... it really is.
At least he won't be in front of the cameras next week when ISMs, the employment and Michigan confidence reports are released.
Lastly, its funny to hear that the Fed (or 'GS Jr.') will start looking into GS'redit default swap positions as they relate to the EU and Greece. Do you REALLY think they will even give GS a slap on the wrist? NEVER. They all work together forever. Amazing just how GS set up Greece for this fall a few yrs back when the country was trying to become part of the EU. Its simple .... sell the products to help the company portray itself as having good credit and economic growth ... knowing that you have helped Greece sham the EU, start betting against Greece over time. Its as simple, easy and profitable as it gets.
Agreed with your asessment about Greece's debt and similarities to the US. Regarding your short position on SPY, its tough given the continuing govt spending which makes everything look rosey. The mkt will go down only when GS and other big banks have made enough $ and have increased their short positions, which may not happen until we get closer to the end of the first half of this year. Technically speaking, SPY barely avoided a big fall by staying above $105. And now if it surpasses 110, it may have more room to go up, maybe back to 115, at which of course, if I had any short positions on SPY, I'd increase them.
Did you read the NYTimes article about how GS helped Greece hide its sovereign debt to get into EU? (www.nytimes.com/2010/0...)
It makes you think about the former goldman bankers and others that are running this country's monetary and fiscal policies. They have leverage (advantage, not debt) over the european countries. With the US debt skyrocketting, I wouldn't be surprised if they use such leverage to reduce US' obligations to its debt holders. But at the same time, they can force the US govt to take certain actions not beneficial for the country or the economy, but just for the few banks and/or individuals in those banks. These basically have also artificially increased the value of the dollar lately. I would assume that countries such as china and russia would not be 'victimized' this easily (Treasury said demand for US treasuries declined significantly, especially by china). So, given that they are big debt holders of the US, these maneuvers may backfire. Who knows. But one thing is clear .... Debt will come back and bite you in the you know where no matter who you are. This doesn't mean the mkts will fall tomorrow or next year or 5 yrs from now, but at some point, that closet, those boxes, in which all of these things are being hidden or put away, will run out of room and there's gonna be some cleaning to do. But no matter what ... gold is good.
Anyone could have and should have seen this coming. Govt (both Bushie and Obama-shlobama) had options to help no bank, help all banks or help only the big players. Well, they helped the big boys and made them bigger. Then they hung out the smaller ones to dry ... or hung 'em there like 'low hanging fruits' for the already over-weight (as most Americans are) banks to gobble them up. I don't know about you, but this certainly represents an open mkts and a capitalistic society. I'm not saying every bank must have been helped by the govt. I'm saying none of them should have been helped. Now we're seeing the stronger get stronger with govt help .. forcing the govt to spit out more regulations onto this mkt. What a cycle!
"I'm starting to like Netflix more."!??!!?!??!?!? NFLX has already performed very well. In fact, while the entire mkt was tanking, this held its own and then hit its all time highs. And currently its not far off of that level. I'd say he might be a bit late to the game as he was with CSTR. He started pitching CSTR when it had already gone from low 20s to around 30-32. Not sure about Cramer's historical accuracy rate, but he hasn't been that accurate regarding these two names.
key element? You'd think so, but with this mkt, we even could see some pigs fly soon. The consumer sentiment data came in significantly below consensus ... during the Holiday season ... and S&P and the Dow are up 0.70% and 0.80%, respectively. Amazing.
being acquired by chdn for cash and stock. with mgmt and the board agreeing to this, it doesn't look like they were very confident in the company's growth potential. then again, with Brodsky as chairman initially as ceo), everyone knew that he'd start slightly turning it around and sell it at 100%+ change in price to benefit many parties, including new world opp. but with more than 65% of this $2.84/share deal (based on today's closing price) being the CHDN stock, it'll be pretty risky to stick with it and hope to get a better deal. up nicely in AH, but will prob see some selling starting late morning. Good company, structured well with very good strategies (unlike a few yrs ago), but the current environment has forced shareholders (old & new) to lose patience. Selling this at around $2.60 - 2.70 doesn't appear to be a bad deal.
The govt, the same one that bailed out these mofo bankers, should look into GS' trading during the week of Oct. 26. Does anyone remember what GS did during that week? The bank that had been more bullish regarding the stock mkt, came out with a lower GDP growth rate estimate. One of its great economists said that inventory replenishment may not have turned out to be that great, so he/she/who-knows lowered the GS GDP growth rate forecast from 3.0% to 2.7%. And the mkt tanked. I wonder if GS was actually buying the market indicator ETFs, or buying calls on those or selling puts, or ... you get the picture. Just curious because the next day, the GDP growth rate turned out to be 3.5% and the mkt of course went to the moon. It makes me wonder how these experts could make such a mistake? Its nearly impossible or unthinkable. We're not talking about making a call on a stock ... its the economy ... the GDP. Then I thought to myself .... if you are a bank that handles more of the trading than the next 5 banks combined, if you are basically the master of the US govt, if you are the master of the Fed, which is the co-master of the govt, if you basically control all other i-banks, if all other M&A opps come falling into your lap because there's basically only 1 maybe 2 banks that compete with you ........ well ... then you can do ANYTHING you want, which includes manipulating the mkt, as you did during the week of Oct 26. Good job GS! I guess if anyone or org had this much power, it would also abuse it as you have ... and continue to do every trading day.
Although I am not bullish regarding this economy and the mkt, and I do agree with your thoughts on consumer credit and consumption, I must disagree with your interpretation of last quarter's GDP figures.
First, actually at the end of 2008, or in Q4 of that year, the official annualized GDP contraction rate was 5.4%, not 6.4% as you stated.
Second, your claim of a 10% swing by merely subtracting annualized growth rates from each other, which are based on SEQUENTIAL growth estimates, is not correct. The 3.5% annualized growth rate basically means that compared with the prior quarter (Q2), the economy grew at a 3.5% annualized rate, or a monthly rate of around .292%. So its saying that if the economy grew at this rate for the next 12 months, then we could say that the economy expanded at a rate of 3.5%. Such rate is not directly related to the Q4 2008 GDP. Similarly, the annualized 5.4% contraction rate of Q4 2008 was based on the sequential estimated growth for that quarter.
Simply put, your assumption of a "10% shift in U.S. GDP" during the last 9 months doesn't appear to be correct.
The 3.5% growth rate figure is derived from BEA's estimated chained-dollar GDP, which I would say would be a better figure for you to use because then you can actually compare it with Q4 2008. If you do that, you will actually see that compared with Q4 of last year, the Q3 GDP contracted at a 1.3% annualized rate, indicating a less significant "shift".
I think most will agree that this is likely to be another jobless recovery. The question is - will it be successful similar to the previous two jobless recoveries. Those were successful but only for a short period of time. What drove those receoveries was consumer credit and consumers leveraging various assets (such as homes) to continue to consume, helping push those recoveries through.
The environment is very different now. Consumers no longer have credit. In addition, they remain highly levered. During the first four months of this year, we were actually seeing positive indications for the well-being of this country's recovery for the LONG-TERM - 1) consumers were trying to pay off their debts; and 2) they had begun saving again. However, govt stimulus plans (such as the cash for clunkers) drove consumers to again save less and spend more. Those green weeds started sprouting and everyone thought everything would be great, indicated by the huge jump in the equity mkt.
Unfortunately, the govt programs not only help sprout those greeneries, but they also help kill them. The green shoots will not and have not grown to create a lasting, or I must say, a valid, economic recovery.
Although current zero rates indicate otherwise, I still think paying off debts and saving would be the best way to recover from this downfall. It would help the recovery last for much longer than basically every election year. As we all know, the politicians will push through bills that provide that short-term 'high' for the economy, but also make the economy more dependent on those measures and/or dollar printing in the long-run.
The equity mkt has had a life of its own. Its basically controlled by a couple of big banks (just ask yourselves why Goldman came out with a huge cut in its GDP estimate only a day before that # was to come out) that make money just by trading. They help themselves by publishing very very low estimates which they know most companies can beat during earning seasons. Look at their assets ... all plummeted and continue to do so. They are not willing to lend. That should give you a good idea about where they think the economy is really headed.
It comes down to accepting the highly probable change(s) taking place in our economy - consumers are not willing to consume (unless the govt gives them free $, which will come back and haunt them in a few yrs) and the US GDP cannot remain strong based on 70% consumption.
Let the Chinese continue tap into their huge domestic mkt. Let them get a taste of that great "high" of consuming. And let it create an opportunity for us to finally begin producing/manufacturing again. This transition will take a while, but its the best for the US economy for the long-run. With cheaper dollar (will likely be cheaper in a couple of yrs too), let those Chinese buy our stuff. Let the cheaper dollar make the US more attractive for production not only by American companies but also foreign ones. let the true measure of the wellness of the economy be based more on production rather than consumption.
Of course no one has such patience. So we will continue to go through these short-term cycles and will continue to destroy the economy from within. Sounds a bit pessimistic ... but I guess that's been my view of the economy for a long time.
I usually agree with you, but on this one, I'd say the banks are doing the right thing. I'd rather see bank assets (loans) decline in the short term and deposits/cash build up. The credit crisis that we experienced was unbelievable. I'd also like for consumers to save more. In addition, without much consumer demand, I'm just wondering if there is that much of so-called inventory replenishment necessary and if there's demand for credit/loans from small businesses. Just my thoughts.
On Oct 08 07:51 PM conceptwizard wrote:
> Try asking a small business owner whose bank is strangling him by
> cutting credit lines, while his inventory is dwindling, if he about
> to rehire in mass numbers.
>
> The banks are crippling American small business and the consumer
> and the Obama Admin and Congress are letting it happen. Their answer
> is to use rebates and free cars.
>
> We already lent the banks the money, with no stipulation for them
> to lend it back out.
One of the most dependable indicators of a potential turnaround in unemployment is some consistent increase in part-time/temp workers. Before even the companies that supposedly overcut HR decide to bring them back, they begin filling some positions with part-time workers. Its basically a way to hedge their hiring against the economy potentially declining again. And we haven't seen much of that. Let's see what happens when (if) the stimuli expire. I'd say not much would happen. Just my thoughts.
He's like the rest of them - adjusts his views every single day just so he can continue be viewed as a soothsayer. Lost respect for him once I realized just how often he adjusts his views about the mkt and the economy. Listening to him these days is just like listening to a POS politician.