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Chris Ridder

 
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  • The Problem With The Fed Paying Interest On Reserves [View article]
    It is blank in the table in the article.

    You can also go to the data directly with this link:
    http://nyfed.org/12yg38A

    There is a tab for "T-Bills" that has no data in it. There is data for Notes, Bonds, Tips, & Agencies.
    Aug 7, 2014. 08:53 AM | Likes Like |Link to Comment
  • The S&P 500's Operating Or GAAP EPS [View article]
    I hope you don't mind, I am going to publish (attempt to at least) an article about this.

    Stick to the trading or investing plan, which should included knowing when to take a loss. I learned that the hard way from 20 years of trading.
    Jul 16, 2014. 02:39 PM | Likes Like |Link to Comment
  • The S&P 500's Operating Or GAAP EPS [View article]
    Unfortunately Russell does not provide the same data that SP does for its index. However, look at this data for the Russell 2000 ETF, IWM, http://bit.ly/1qfVVaU

    This shows that the P/E on June 30th was 30 and in the fine print (mouse over the "i") that, "Negative earnings are excluded, extraordinary items are excluded, and P/E ratios over 60 are set to 60." Also, the price to book appears high at over 4 but then get this in the fine print, "Negative book values are excluded from this calculation and holding price to book ratios over 25 are set to 25." Caveat Emptor!
    Jul 16, 2014. 02:08 PM | Likes Like |Link to Comment
  • The S&P 500's Operating Or GAAP EPS [View article]
    As seen in the graphs the ratio fluctuates widely. Look at the "dip" of 2008 compared to 2000, and also look at the highs have never been achieved that were set early in the data series (top graph). Finally, I left out the data from Q4 2008 because that data would skew everything even more, so that the data presented would become unclear; to be clear this this applies to the bottom graph and confidence interval. Hence, an argument can be warranted that earnings quality has declined over time.
    Jul 15, 2014. 06:30 PM | Likes Like |Link to Comment
  • Alcoa's EPS Smelted By Balance Sheet [View article]
    JRF77,

    My cash flow calculations, though positive, are not as optimistic as Alcoa's method which simply takes operating cash flow and subtracts cap ex.

    Here is another way to calculate free cash flow to the firm from the CFA Institute curriculum:

    " FCFF = EBIT(1− Tax rate)+ Dep − FCInv − WCInv "
    Institute, CFA. Level II 2013 Volume 4 Equity. John Wiley & Sons P&T, 7/9/2012. VitalBook file. Page 213

    I calculated the following values (in millions):

    EBIT = $312
    Tax rate = 37.68...%
    Dep = $349
    FCInv= $258
    WCInv= $47

    Plugging into the above formula one has a free cash flow to the firm of
    $238.44 mm. Unfortunately, free cash flow is not a GAAP measure so companies feel free to use whatever method suits them.
    Jul 10, 2014. 03:22 PM | Likes Like |Link to Comment
  • Alcoa's EPS Smelted By Balance Sheet [View article]
    Sorry, for some reason my reply was chopped into pieces; so here we go again:

    "Not only that, who says that the accounts payable are even related to inventory? "
    - Alcoa says that on their financial statements! On the balance sheet the line item reads "Accounts payable, trade". Read the definition from http://bit.ly/TV5PiX

    "Definition: A trade payable is an amount billed to a company by its suppliers for goods delivered to or services consumed by the company in the ordinary course of business. These billed amounts, if paid on credit, are entered in the accounts payable module of a company's accounting software, after which they appear in the accounts payable aging report until they are paid. Any amounts owed to suppliers that are immediately paid in cash are not considered to be trade payables, since they are no longer a liability.

    ...

    Other types of payables, such as accrued expenses, dividends payable, or payroll expenses, are recorded in other accounts in order to more easily identify them.

    A key difference between trade payables and non-trade payables is that trade payables are typically entered into the accounting system through a special accounts payable module that automatically generates the necessary accounting entries, whereas non-trade payables are typically entered in the system with a journal entry."
    Jul 10, 2014. 12:00 PM | Likes Like |Link to Comment
  • Alcoa's EPS Smelted By Balance Sheet [View article]
    " it [ accounts payable ] should go down in future quarters as the wrap up of smelting facilities is realized"
    - If accounts payable decreases this will lead to a decrease in operating cash flow

    "Not only that, who says that the accounts payable are even related to inventory? "
    - Alcoa says that on their financial statements! On the balance sheet the line item reads "Accounts payable, trade". Read the definition from CFO). The cash flow change in operating accounts does not equal the actual change on the balance sheet. Because the additional inventories and receivables are acquired as part of an acquisition, the cash paid for their acquisition is treated as cash for investment.

    However, reported cash from operations in the year of the acquisition(and in subsequent years) may still be distorted. The degree of distortion depends on whether the level of working capital immediately after the acquisition is maintained over time.

    The potential distortion can be illustrated by considering the inventory acquired. Although the cash paid for the acquisition of the inventory does not flow through cash from operations, the cash received when the inventory is sold does. Thus, CFO is inflated as the proceeds of sale are included while the cost of acquiring the inventory is not. [Bold not in original]

    This distortion will be somewhat mitigated if inventory is continually replaced, as the cash outflows for new inventory will offset cash inflows from sales. However if there is a reduction in the acquired firm's working capital, CFO may be distorted, and careful analysis is required to understand the impact. "

    From: The Analysis and Use of Financial Statements by White, Sondhi, & Fried (1994 Edition) pages 859-861
    Jul 10, 2014. 11:30 AM | Likes Like |Link to Comment
  • Alcoa's EPS Smelted By Balance Sheet [View article]
    "If inventories were built up at the end of this quarter then they were also paid for in this quarter,..." I disagree with this statement as typically the purchase is financed and a company has an accounts payable liability. Look on Alcoa's balance sheet under "Accounts payable, trade". When this payment is due depends on the terms with the vendor.

    When inventory grows cash flow decreases
    When accounts payable increase cash flow increases
    When inventory decrease cash flow increases
    When accounts payable decrease cash flow decreases

    Hence, the analysis provided about inventories leaves out the cash flows from accounts payable.

    Notice, also that in Alcoa's earnings release that is shows -$33 million of operating cash flow for the first half of 2014
    http://bit.ly/TUOcjj
    Jul 10, 2014. 08:56 AM | Likes Like |Link to Comment
  • Trouble For 'Bridgewater Risk Parity' Model [View article]
    "When Risk Is Not In Parity: Bridgewater's Massive "All Weather" Fund Ends 2013 Down 3.9%" here is the link
    http://bit.ly/1fhJpCh
    Jan 9, 2014. 09:36 PM | Likes Like |Link to Comment
  • Trouble For 'Bridgewater Risk Parity' Model [View article]
    "When Risk Is Not In Parity: Bridgewater's Massive "All Weather" Fund Ends 2013 Down 3.9%" here is the link
    http://bit.ly/1fhJpCh
    Jan 9, 2014. 09:35 PM | Likes Like |Link to Comment
  • Inflation And The Money Base [View article]
    I would refer you to Dr. Murry Rothbard's book "The Mystery of Banking" and his other works with regards to the measurement of money and process of inflation.
    Oct 25, 2013. 02:46 PM | Likes Like |Link to Comment
  • Inflation And The Money Base [View article]
    This regression tested CPI and the money base - the excess reserves. You could just do the CPI and money base but now banks are holding huge excess reserves. This was done to attempt to have the closest, but not perfect, apples to apples regression of CPI vs money in circulation. So to be clear the test is not on reserves theoretically.
    Oct 24, 2013. 08:12 PM | Likes Like |Link to Comment
  • Inflation And The Money Base [View article]
    "There's some noise in the numbers. " - This "noise" should theoretically be "picked up" by the error term in the regression
    Oct 24, 2013. 11:30 AM | Likes Like |Link to Comment
  • Inflation And The Money Base [View article]
    The data used was annual time series and not monthly
    Oct 20, 2013. 06:57 PM | Likes Like |Link to Comment
  • 4 Reasons Why Gold Will Continue To Decline [View article]
    Were you using gold price levels or price changes? If levels then you have a unit root in the linear regression and unfortunately the statistics are invalid.
    Here is a brief overview from wikipedia http://bit.ly/13HyJm0

    A time series needs to be stationary for statistical inferences to be valid using ordinary least squares regression techniques.
    Jun 13, 2013. 12:24 PM | 1 Like Like |Link to Comment
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