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Christopher Wallace  

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  • The Impossible Situation For North American Palladium [View article]
    Thanks for your comment, hksche. PAL is a frustration to me. I really want to like it and invest in it because I like the palladium space and if these guys can survive the next 2 or 3 quarters, and are able to execute their mining plan, they could have a terrific company and therefore a terrific investment. But I think there is good reason to question if they have the finances to see their way through to executing that mining plan. I have submitted another article on PAL to Seeking Alpha. I will post a link here if it gets published.
    Nov 16, 2013. 01:25 PM | Likes Like |Link to Comment
  • The Impossible Situation For North American Palladium [View article]
    I have now read Q3 earnings report and conf call transcript. Liquidty is now the issue....the big issue.
    Nov 15, 2013. 03:54 PM | Likes Like |Link to Comment
  • Leucadia National: SOTP Points To 20-30% Upside [View article]
    A great analysis of a great company. One thing that concerns me is that if LUK deploys capital to investments "of no greater than 10% of book value" then it could start to look like a fund which would likely cause to trade at a discount to BV.

    Similar to the comment from nycfamily above, LUK is a great investment after a long down trend in the market; not only do they pick up some great bargains, but the market has tended to unfairly punish LUK shares during those downtrends.
    Nov 15, 2013. 10:45 AM | Likes Like |Link to Comment
  • Syria Puts Defense Contractors In Spotlight: Arotech Shines [View article]
    A great Q3, but guidance is confusing; looks like no EBITDA for Q4??
    Nov 12, 2013. 03:33 PM | Likes Like |Link to Comment
  • Exco Resources plummets as Q3 earnings miss estimates [View news story]
    A rare mis-step for Wilbur. I was bullish back in 2011, but their debt load was just too great for them to really make any hay when gas prices rose. It is starting to look like $5 gas is needed to save this turkey.
    Nov 1, 2013. 12:07 AM | Likes Like |Link to Comment
  • The Lack Of Profitability Is Structural [View article]
    A solid, detailed analysis, Paulo.

    Taking it a step closer to the simple side of life, the structural challenge to AMZN's profitability comes from the increased costs of fulfilling orders on general merchandise versus media. Media that can be delivered electronically has ostensibly no fulfillment cost. CDs, DVDs and other forms of media (as well as other smallwares) have very low fulfillment costs; they are cheap and easy to pick and pack. When you move into the general merchandise category, this is no longer the case. Washing machines, ski jackets, etc. are bulky, require large inventory space and lots of people to pick and pack. And this is why fulfillment costs at AMZN continue to rise, notwithstanding all they are doing to become better at logistics. Costco has the whole largewares business model dialed: they get their customers to come in to their big warehouse and fulfill their own orders! WalMart the same. That is why AMZN structurally can never touch those two competitors in terms of profits. AMZN can use low prices to attract customers, but not profits. They have perverted the e-tailing model from one of selling smallwares with low fulfillment costs to one of selling everything; and that model does not work, if profits are your eventual goal.

    If AMZN could get rid of their 11% fulfillment costs, they would have the game beat. But the only way to do that is to build with bricks and mortar and get the customer to come to them and fulfill their own order. Or AMZN could return to its roots of selling books and music at much lower fulfillment cost and make a decent profit at much lower revenues. Size does matter, but in this case, bigger is not better.
    Oct 29, 2013. 11:17 AM | 3 Likes Like |Link to Comment
  • Why Amazon May Be Worth $165 Billion, More Or Less [View article]
    @Michael: the crux of your argument "If Amazon does become a $500 billion dollar company and can earn 5% net income to sales it would have 2022 earnings of $25 billion" rests on it turning losses into profits. Revenues have more than doubled in the last 4 years but net income has declined. Fulfillment costs have steadily risen as a % of sales and now sit at over 11%. The argument of volume over the break-even, as seems to be implied in your thesis, has thus far not applied to AMZN, even though it is tracking towards $80 B. AMZN has done an admirable job of attracting customers, growing sales, and developing brand recognition. Each admirable traits, to be sure. But their main job, to show a profit, they have failed at, and nothing that I can see in their numbers suggest that continuing the sales growth trend will ultimately change that failure to make a profit.

    And if AMZN does hit that $500 B mark, that would put it up there in WalMart's range. WMT, has focused on profits over sales growth, and consequently is admired for its bottom line. If AMZN does reach $25 B in profits, that would positively crush WMT's $16B. I see nothing in any of AMZN's number trends that would suggest it will become more profitable than WMT. Larger in sales, perhaps, more profitable, never.
    Oct 29, 2013. 10:37 AM | 1 Like Like |Link to Comment
  • The Basic Fallacy In Momentum Stock Analysis [View article]
    It is a pretty weak justification on fundamental grounds, which your many articles on AMZN have pointed out. But I guess it is even harder to justify a six-figure salary with a research note that says "this momo stock will continue to go up until it doesn't".
    Oct 29, 2013. 09:46 AM | Likes Like |Link to Comment
  • The Basic Fallacy In Momentum Stock Analysis [View article]
    This is a good article. I think the real problem is people apply the wrong type of analysis to momentum stocks. A lot of us investors are one-trick ponies. We are fundamental investors, we use Graham and Dodds value metrics to judge our stocks. I say this without pointing a finger; I am at least as guilty as anyone else of this.

    But fundamentals and traditional value investment theory do not apply to the momentum stocks mentioned here and momo stocks in general. The trajectory of these stocks do not fit in to the fundamental paradigm. Their over-valuation can continue far longer than any fundamentally-oriented investor can imagine. Forget analyzing their fundamentals. It won't correlate to their stock price. Paulo saw that with AMZN, I saw it with CRM, etc, etc.

    If you want to short massively over-valued momo stocks, take a course on technical analysis. The charts will reveal when the momentum has come out of these stocks. The fundamentals will convince you of the brilliance of your short thesis, but until the technicals say so, you will be wrong. Fundamentals just don't apply to momo stocks....until they do. And then look out!
    Oct 28, 2013. 02:49 PM | Likes Like |Link to Comment
  • The Impossible Situation For North American Palladium [View article]
    I just listened to their recent presentation at St Andrews. It was long on intentions, and short on hard numbers. The shaft has reached depth and so costs of bringing the ore to the surface will decline going forward. More importantly, the cap on production rates is now lifted. The current constraining factor is how much ore can now be mined on a daily basis and now guidance was provided on that, save to say that production over the last 3 weeks has avged 2500 tonnes per day. du Toit also said that 2014 will be a transition year and that transitions can be rocky along the way. Alternative mining methods are being explored and studied. Q3 earnings will give some insight but Q4 will have much more meaning. It does not sound like guidance will come until January. Nothing compelling to sink your teeth into, I am afraid. I was hoping for more positives than just having reached depth with the shaft, and more hard data, rather than conversation.
    Oct 22, 2013. 01:11 PM | Likes Like |Link to Comment
  • BlackBerry: Fairfax Deal At Risk, Could A Bidding War Propel Shares Past $12? [View article]
    The issue of this article is whether or not a bidding war is about to erupt for BBRY and hopeful longs seem to be missing the point. True, BBRY has a book value higher than market, even tangible BV is higher than market. And a sum-of-the-parts valuation, pre-earnings release gives a much higher value. But those considerations, while true, do not create a bidding war. The first requirement for abiding war is missing: a bid. Fairfax has issued a letter of intent that is conditional and nearly 4 weeks have passed with no removal of those conditions. Lazardis has mumbled something about intention but not actually made a bid. Lenovo is likely in the data room right now, possibly others too. But the key thing is that there is no firm bid that has to be beat. Give a firm unconditional bid with an 8-handle on it and the BOD will be all over it like a fat kid on a smartie. Maybe someone could get away with less. But the main point to realize is that no one presently feels any compunction to out bid Fairfax on price. A bidding war, with the attendant escalation in price will not happen until someone puts up a firm bid. Right now certainty of close trumps price. A properly funded bid does not need to compete on price with an un-funded bid.

    I feel sorry for the longs who have been grossly mis-treated by management and the Board. They deserve better. But to hope for a bidding war when there is no funded bid is to set yourself up for disappointment.
    Oct 18, 2013. 04:32 PM | 3 Likes Like |Link to Comment
  • BlackBerry: Fairfax Deal At Risk, Could A Bidding War Propel Shares Past $12? [View article]
    Who cares about Nov. 4?

    You should. That is the date at which BBRY becomes no-bid if Fairfax has not gone firm. With things changing for the worse so rapidly for this company, being complacent and sanguine about the situation hardly seems warranted.
    Oct 18, 2013. 11:21 AM | 1 Like Like |Link to Comment
  • BlackBerry: Fairfax Deal At Risk, Could A Bidding War Propel Shares Past $12? [View article]
    No bidding war will happen until and unless there I a firm bid to top. Fairfax' $9 intention remains unfunded; a firm bid at something less than $9 would be accepted by the Board. Certainty will trump price.

    The sum of the part analysis provided is accurate prior to the disastrous earnings announcement. Cash today, is probably $500 mil to $1 bil less, depending on how they have re-negotiated their supply commitments. And what are the value of those patents with a handset business that is tanking?

    If Fairfax has not gone firm by Nov 4 all of their break fees and other goodies fall off the table. I can certainly see the potential for a bid from Lenovo or another strategic. But until such an event happens, and a firm, funded bid surfaces, all talk of a "bidding war" is premature.
    Oct 18, 2013. 10:34 AM | 1 Like Like |Link to Comment
  • Volatility And The Last Debt Ceiling Crisis: A Lesson From History [View article]
    I stand corrected! Thank you.
    Oct 9, 2013. 03:47 PM | Likes Like |Link to Comment
  • The Sky Is Not Falling, But It Is Teetering On Its Edge: Protect Your Portfolio [View article]
    +1 to dwdallam, this has some great comments and without the usual rancor that can be found on SA.

    @Michael, great article and I take its point to heart. I believe there exists some potential for a black swan event to occur near the end of this month. While it seems unimaginable to me that grown men with the ability to avert disaster would willfully walk into one, that may just become a comment on the limits of my imagination. I now own a few slightly in the money calls on VXX, expiring on Oct 29. they will either go to zero or near zero or become a multi-bagger. With VIX in backwardation and the government shut down and default or ugly compromise as possibilities by a date certain, I think the options are mis-pricing the risk potential. Risky for sure, but one of the few times when such action, in small amounts, seems appropriate.
    Oct 9, 2013. 01:50 PM | Likes Like |Link to Comment