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Jason Merriam

 
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  • $60: Not A Reasonable Price For Oil [View article]
    Pompano,
    I tend to agree w/ you on the Saudi angle. In addition, US/Saudi relations tend to be allies of convenience. We both want ISIS neutralized, regime change in Syria and Putin to change his position on Syria.

    As for Putin, the US wants an end to Russia's military annexation of Ukraine. Lower oil prices very well may be the Saudi's compensation.
    Dec 18, 2014. 01:00 PM | Likes Like |Link to Comment
  • ETF Investing Guide: A Core ETF Portfolio [View article]
    David,
    Very sound core etf foundation and excellent food for thought. Thanks.
    It is good advice not to recommend weightings, as it is as you mention, an issue of risk tolerance.

    On the issue of allocation and in response to Aero's questions: a good place to start on the allocation process might be to do a Google query of "investment allocation questionnaire". You will see a number of resources to help in this regard.
    Dec 18, 2014. 12:33 PM | Likes Like |Link to Comment
  • The Prisoner's Dilemma Facing OPEC And Investors [View article]
    George,
    Always enjoy the perspective. OPEC is getting a taste of their own medicine. Member countries have been cheating on their quotas as long as I can remember and about 96% of the time!

    While OPEC's control of production and prices may not be absolute, they might still have influence over member behavior. Oil is "leverage" and there are some interesting comments here about who might be "squeezing" who.

    Venezuela has its own unique problems and crude exports are responsible for 95% of their foreign currency reserves. Unfortunately for Venezuela, the culture and interventionist politics of Chavez and Maduro (baby Chavez) relied on "pricey" petro-dollars to fund anti-pragmatic policies. Investors of VEN bonds have been aware to the risks for years, but low oil prices will also add political and social risk.

    American politics are another angle to consider. The energy independence notion fostered the shale boom, thanks in part to bitter memory of the '73 embargo. OPEC didn't cause the embargo, Arab members of the cartel did (also Egypt, Syria and Tun.), in retaliation for U.S. support of Israel in the Oct. Arab-Israeli war.

    However, the US and Saudi Arabia share a unique political objective: to squeeze Putin. The US placed sanctions on Russia are punishment for its aggression in Ukraine. Yet, US/SA both want to limit Iran's nuclear ambitions and we both want to crush ISIS and topple the Assad regime in Syria.

    When you consider almost half of Russia's government budget is funded with oil revenues, low spot prices (in theory) will adversely impact Russia's economy. Forced liquidation of Brent would also hurt investors long the oil patch.

    It would not be a stretch to imagine cheap oil as Saudi "compensation" for US airstrikes against ISIS, Syrian infrastructure or an effort to thwart Iran. Putin however, is a cagey sort and not shy about being provocative himself.

    Your title "The Prisoners Dilemma...." and article is good food for thought.
    Nov 30, 2014. 04:35 AM | 2 Likes Like |Link to Comment
  • Keurig Green Mountain: From Adversity To Crossroads [View article]
    Dodilligence,
    Just so you know that I embrace sportsmanship, I made your comment an "author's pick" and "Like" #1. There is nothing better than a healthy debate and you get high marks for style.

    1) Thank God (no pun intended); that loaves-to-fishes act was pretty impressive though.
    2) Agreed, setting odds/lines is hard; I'll stick to my weekend NFL bets, it's difficult enough.
    3) So that we're on the same page, the inquiry was opened prior to GAAP-achino.
    4) The accountant/audit issue is a weighty subject best left to an entirely different discussion
    5) stress is the evil sibling of volatility; did HE say "clean" or "cleaner"; since HE is all knowing, all seeing, did he go into any detail about due-diligence? I concur with HIS opinion that the folks in Atlanta are pretty sharp.

    I'm pleased that your conversation with HIM brought you peace. I'll take HIS advice (thanks for passing this on to me by the way) under strong consideration. HE is after all, the ultimate "insider", but if HE could fill in a few blanks in the story, it would do wonders.

    Have a nice and safe holiday!!

    Nov 26, 2014. 01:12 PM | Likes Like |Link to Comment
  • Alpha Natural Resources' 1-Year Default Probability Drops But Bonds Lead Widest Credit Spread Rankings [View article]
    Donald,
    Wow, it's rare to read comments taking so much umbrage with probability. In the coal patch no less!

    Anyway, the wide spread/heavy volume/low price scenario offers a good enough excuse to sharpen a pencil or two and dig a bit deeper. Thanks again for a superb overview.
    Nov 25, 2014. 10:08 PM | Likes Like |Link to Comment
  • Keurig Green Mountain: From Adversity To Crossroads [View article]
    Ancient,
    There are any number of possible outcomes regarding KO's involvement. The Cold platform is the "X" factor. It would seem to me that KO stands to benefit from greater leverage of the Cold platform as they have the scale and depth of integration and distribution capability.

    As for KO taking a controlling interest in GMCR, anything is possible. When you consider that KO's original cost basis represents only 13% of last year's net income, the capital appreciation provides KO many options.

    You make a good point about KO's potential to liquidate opportunistically. As a passive investment, paper gains also enhance KO's shareholder equity. The paper gains could also be a tax efficient use of capital in event of a controlling interest. Or, a value proposition to benchmark cost-basis relative to their perception of intrinsic value.
    Nov 25, 2014. 02:57 PM | Likes Like |Link to Comment
  • Keurig Green Mountain: From Adversity To Crossroads [View article]
    Dodilligence,
    1) Jesus wasn't an accountant, but "reasonable evidence" in my book would be something resembling quality-of-earnings. Which for GMCR in past years, tended not to be reasonable or evident. The prior restatement would point this out.
    2) Competition was one of many issues in Einhorn's thesis. He wasn't wrong about the lack of free cash-flow in that GMCR management admitted as such and when "positive" cash-flow was reported, it was largely balance-sheet generated.

    He wasn't wrong about his capex forecast as spending pace was rising faster than revenues. Then when GMCR cut capex guidance it was because they were desparate to preserve working capital. The bloated inventories amplified this concern as revenue targets weren't being reached. Einhorn's concerns about MBlock and other shenanigans have yet to be disproved or refuted.

    You mention being kind in saying Einhorn was 95% wrong. Rather arbitrary, but I catch your drift. Out of curiosity, how wrong would Einhorn be if GMCR were to potentially make further restatements?



    Out of curiosity,

    Nov 25, 2014. 02:21 PM | Likes Like |Link to Comment
  • Keurig Green Mountain: From Adversity To Crossroads [View article]
    newmone,
    I'd like to add another point to your comments about Walmart. For FY2014, Walmart represented 17% of GMCR's total consolidated bet sales.
    Nov 24, 2014. 09:59 PM | Likes Like |Link to Comment
  • Coca-Cola Has Growth, Margin And Capital Deployment Problems [View article]
    Tom,
    Just found this article today, read it and it's an excellent overview of the issues. On the matter of capital deployment, KO is also under the microscope for some of its recent equity stakes in other companies.

    Although KO has been successful with incubator and step-up deals in the past, the recent stakes in Monster and GMCR come at a time when KO's growth and earnings are contracting.

    KO has a decent record with vertical/horizontal integration previously, but the dollar value of these investments aren't chump change. If anything, this adds additional risk to salient points raise in your article. Your article was very informative, thanks!

    Nov 24, 2014. 09:24 PM | Likes Like |Link to Comment
  • Keurig Green Mountain: From Adversity To Crossroads [View article]
    AHussain,
    I appreciate your comments . Einhorn was one of the last big dogs short. He had been covering earlier, but the Q3 letter to partners indicates remaining positions were covered.

    As for the due-diligence, I touched on this in an earlier article (link below).
    http://seekingalpha.co...

    Obviously, the closed SEC probe removes some clouds of enforcement concerns, but there may have been remedial actions taken by the company which factored and/or influenced the outcome. Also, KO is aware of GMCR's operational improvements in the two years since Kelley's arrival.

    Does this open the door for KO to consider a larger or controlling stake? That's a $24b question many people are curious about. However, given that KO is also under the microscope regarding its growth and capital allocation plans, I can't imagine KO paying any premium multiple for GMCR's existing assets. At least not at this juncture.

    I could be quite wrong about that, but KO's been savvy in past step-up deals where initial equity stakes have led to whole acquisitions. It's all about the end-game. KO's cost basis is $2b for a 16% equity stake and the question is would they pay a higher cost basis for the 84% equity they don't yet own?

    You raise very good questions and yes, when there is smoke there can be fire. This will be an interesting story to watch. Best of luck on your thesis!

    Nov 24, 2014. 08:17 PM | Likes Like |Link to Comment
  • Keurig Green Mountain: From Adversity To Crossroads [View article]
    Nordic,
    Better job doing what? What's your point?
    Nov 23, 2014. 09:56 AM | Likes Like |Link to Comment
  • Keurig Green Mountain: From Adversity To Crossroads [View article]
    Ancient,
    To be clear, the company's audit committee of the board of directors only initiated their internal review in light of the SEC inquiry. Prior to the company's announcement of the restatement (and after the date of notification by the SEC Div. of Enforcement) they retained legal counsel and a forensic accounting team. These points are critical to the discussion because the co. had no choice but to keep regulators "in the loop".

    What most investors do not realize is that because of the inventory issues (which were primarily incorrect standard costs), became relational to the marketing incentives, royalties, failures to reverse accruals, brewer markdown support, etc.

    This turned into a chocolate mess and you're going to believe the company's explanation that the errors were miscommunication between the sales and accounting departments?

    Granted, PwC their "independent" accounting firm should have been raising its own questions, but the audit process is not designed to detect impropriety. Auditors do very limited testing on the financial statements and look to see if the numbers add up and accounting rules have been properly applied.

    Given the backgrounds of Blanford (Philips, Maytag, Johns Manville, P&G) and Rathke (Ben & Jerry's, Wild Oats), this kind of crap should have never happened.
    Nov 23, 2014. 09:50 AM | Likes Like |Link to Comment
  • Keurig Green Mountain: From Adversity To Crossroads [View article]
    Dodilligence,
    If it makes you feel any better, I meditate often. Thanks for your concern though.

    I encourage you to put the SEC probe into context.
    Sept 28, 2010: Co. discloses probe (SEC notified them 8 days earlier). On the same day (Sept. 28) the company reported it had discovered an accounting error involving K-cup margins.
    Nov. 19, 2010: Co. disclosed it had discovered four new accounting errors and on same day announced they would restate reports from 2007 through thirteen week period ending June 26, 2010.

    Interpret at will, but those are material issues. If you have trouble accepting that, then out of mutual concern and implied regret, I'll return your cheap shot "you need help" back at you. Sorry, but there can't be a (as you put it) "better argument that their numbers are better than 99.99% of all companies in the market". Inherently subjective, but it would make one hell of a good research project for an enterprising statistician!

    With the pending departure of CFO Rathke, the odds of potential adjusted financial results for FY 2013, 2014 or 2015 push the bet closer to even money.

    As for Einhorn's thesis, it wasn't wrong on every point. The fact the SEC closed its investigation does not refute or render Einhorn's accounting concerns
    inaccurate. Ditto for concerns about growth and competition.
    Where his thesis erred was that GMCR would lose monopoly position via expiration of patents. The company did in fact lose some market share in the short-term, but the closed-loop of new 2.0 model was clever. This is what defeated Einhorn's core thesis.
    Nov 23, 2014. 04:16 AM | Likes Like |Link to Comment
  • Keurig Green Mountain: From Adversity To Crossroads [View article]
    pica314,
    I don't think you will find anybody dispute the profit opportunity of convenience. However, your points about the negative reviews and tips to work around the closed loop are well taken.

    Comments by CEO during earnings call suggest an effort by the company to win over disenfranchised customers with a pod exchange of some sort.
    Nov 22, 2014. 09:03 PM | Likes Like |Link to Comment
  • Keurig Green Mountain: From Adversity To Crossroads [View article]
    newmone,
    Thanks for the comments. Your technology inputs are noted.
    2.0 is definitely an advanced product in the Keurig portfolio. The inclusion of its closed-loop technology is novel for a consumer appliance, but obviously higher cost with R&D, scale, ramp, etc.

    From a marketing standpoint, GMCR is devoting lots of resources to get the word out and a big part of this push is to convert existing users.

    Your WalMart point of loss-leader pricing is noted and I'm also seeing close-out retailers such as Big Lots advertising K75 Platinum brewers for liquidation (ads don't include pricing).
    Nov 22, 2014. 07:28 PM | Likes Like |Link to Comment
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