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  • Amazon Fresh: One Guaranteed Winner, But Many Potential Losers [View article]
    I was watching "smartest guys in the room" documentary about Enron. One interesting aspect of Enron "business model" was that they would eagerly enter businesses where others failed to make money. Their competitors would scratch their heads and attribute Enron's success to their unique business model, corporate culture. and genius leadership. Today we know that all those profits were fraudulent.

    Amazon doesn't hide its losses, but instead, it created a great story how it will turn these losses into profits in the future.

    The rest of the story of Amazon and Enron are very similar: sell-side analysts explaining how the company is so different from anyone else that normal valuation ad financial analysis don't apply, a cult of a genius CEO (Skilling/Bezos), and fanatical investors who believe that noting could ever go wrong.

    I could see Amazn being a movie or a book within 5 years and not in a good way.
    Jun 16 01:53 AM | 2 Likes Like |Link to Comment
  • Omega Protein: Why EBITDA Is Set To Be Cut In Half [View article]
    This article is just a hatchet job not supported by facts.

    First of all, the fishmeal prices have been rising for over 10 years ( While the prices are very volatile year over year, there is a clear trend up (supply cannot keep up with the demand). The long trend has nothing to do with "Kelvin waves".

    The H2B visa issue is minor. Omega has not used foreign workers in 2008-2010, yet I don't see SG&A going through the roof (check their 10K filing).How on earth did he arrive at 35K a year? The temp workers are only hired for the fishing season (7 months). Does he expect them to be paid about $35 an hour?

    Virginia fishing restriction also is blown way out of proportion. It only applies to VA territorial waters which will add a bit to the cost of travel off Virginia coast.

    Anyone with internet access and basic internet search skills can fact-check within minutes with devastating results to this "research".

    The author conveniently forgot to mention (or perhaps he never bothered to finish reading 10Q?) that while the prices and catch are historically high, the oil yield of the catch is historically low. Omega has had both headwinds and tailwinds last two quarters in terms of profitability.

    I am curious if this just another "hit-and-run" piece and he's already covered his shorts before anyone bothered to fact-check.

    I am writing an article which should refute most of the exaggerations and one-sided "facts" presented above.
    Jun 7 02:10 AM | 2 Likes Like |Link to Comment
  • A False Dawn In The Land Of The Rising Sun [View article]
    Tack, have to respectfully disagree. Investments create jobs, tax revenues, and infrastructure. If New York city company decides to build an office in Jersey City, it's good for NJ economy and bad for New York.

    Or put it another way, even Japanese companies would not invest in Japan, why should I then?
    May 28 08:59 PM | 2 Likes Like |Link to Comment
  • There Are Even Bigger Problems In The Reinhart And Rogoff Thinking [View article]
    I disagree with your thesis or I didn't understand your article. The Fed coordinated with treasury has only full control of nominal rates, the real post-inflation bond rates are set by the market. At some point the Fed may lose control of inflation and the currency because the Fed will be the only remaining buyer if the bonds real rates will become sufficiently negative. This will result in a circle of money printing to buy bonds to issue more bonds to cover interest payments to issue more money to buy them, etc.

    I expect this will happen in Japan under "Abenomics" once the public realizes that the inflation picked up and the real rates are negative. With no one left to buy the bonds, except the central bank, will create a tough choice between defaulting on bonds or inflating away your debt.

    One day (hopefully, not any time soon), the gold bugs may be right. After all, there's never been a free lunch in economics.
    May 3 05:42 AM | 2 Likes Like |Link to Comment
  • Apple's True Opportunities In 2013 [View article]
    Buying Netflix is silly. Netflix can never be very profitable because of the content acquisition costs. Any excess Netflix profit will be eventually recouped by the content owners.. A lot of people already have iTunes account so making iTunes more like Netflix and have it installed on AppleTV is a much better idea.
    Mar 20 01:20 PM | 2 Likes Like |Link to Comment
  • Democrats and the GOP are working together on a bill in Congress to resolve the online sales tax issue. The latest iteration of the bill looks likely to be finalized and sent to President Obama's desk this year. With online sales now repping more than 5% of all of retail sales, states will bring in significant revenue while larger Internet-based retailers will lose some pricing power. Though Amazon (AMZN -1.4%) is the obvious target to take a hit - that expectation could already be baked into its share price - and it could be smaller Internet shops such as Blue Nile (NILE +1.2%) or (OSTK +0.2%) which feel the pain. [View news story]
    Love it!

    "Though Amazon (AMZN -1.4%) is the obvious target to take a hit - that expectation could already be baked into its share price"

    You mean the share price that trades at 300 forward P/E?
    Feb 15 12:37 PM | 2 Likes Like |Link to Comment
  • Is Amazon A Buy Or Sell In 2013? [View article]

    Good solid analysis. However, I think you are being a bit too generous withe "sum of the parts" valuation. Kindle and other services, such a free movie streaming for prime members, are probably "loss-leaders" (Amazon never discloses the actual numbers). Therefore, they add to e-Commece revenue already. You probably can't apply a sales multiple to Kindle and other services. If Amazon was to sell Kindle service, it could probably get a sales multiple you estimated, but it would also hurt their digital sales you didn't count (loss of synergies).

    My valuation is closer to $100-$150 a share but it's anyone guess with so many assumptions. I would consider buying Amazon if it got to double-digits.
    Jan 2 12:03 PM | 2 Likes Like |Link to Comment
  • EZCORP: A Great Value Play [View article]
    Here's my take:

    I am a bit shocked by the market reaction. All their segments have done well, except the same problem of high gold redemption that compressed margins for the pawn loans merchandise. I don't think anyone in the right mind believed they would earn projected $3+ EPS in 2013. There seems to be a shift in consumer behavior where they have run out of gold jewelery to dispose by 2011 and want it back now after getting a pawn loan.

    I don't have a problem with a new strategy opening new stores as opposed to doing constant M&A. This makes their accounting much easier to understand.

    Their projected forward P/E is now around 6. I have a feeling from their conf. call that the new CFO really sandbagged projected earnings now so they can "beat the number". Obama and Warren victory did not help matters but they survived legislative threats from Washington DC before.

    As far as holding your nose in concerned, I believe that good returns have high correlation with a bad smell if you are patient enough to wait for it to turn into outright stench.
    Nov 7 12:02 PM | 2 Likes Like |Link to Comment
  • Amazon (AMZN +4.5%) has done a complete about-face after missing Q3 estimates and issuing soft Q4 guidance (I, II). The Street priced in some worries ahead of time, and could be taking kindly to healthy customer account growth and third-party merchant activity. Nomura's Brian Nowak, who has been bullish for a while, is pleased Amazon's gross margin rose 180 bps Y/Y (albeit while falling Q/Q), but is concerned about still-soaring fulfillment expenses. Overstock (OSTK +6.7%) and eBay (EBAY +1.4%) are also up. (transcript[View news story]
    I believe Q4 may face a significant headwind, while Q3 was significantly front-loaded, due to CA tax issue. AMZN started collecting CA taxes on 09/15 so a lot of buyers rushed in to buy expensive high margin items in Q3 to beat the deadline. While CA is only 12% of US population, it probably disproportionally contributes to eCommerce (think of all people working in high tech)

    I rushed to buy a laptop from Amazon while in LA just a few days before the taxes took effect.
    Oct 26 11:21 AM | 2 Likes Like |Link to Comment
  • Amazon (AMZN): Q3 EPS of -$0.23 misses by $0.15. Revenue of $13.81B (+27% Y/Y) misses by $90M. Shares -1.3% AH. (PR[View news story]
    I think this is a positive for AMZN. The bears are just plain wrong! With losing money now there is no need to worry about a P/E ratio :)
    Oct 25 04:19 PM | 2 Likes Like |Link to Comment
  • EZCORP: A Great Value Play [View article]
    No, inventory is marked at "lower cost or market". Which means if they can't sell it and can't establish a market price, it marked at what they paid for it. If they believe they can no longer get for it what they paid, the inventory has to be impaired.If you want to see whether they have an inventory issue, just look at DSI (days of sales of inventory).

    Here's a good link:

    If we followed your logic, most retailers would be judged immediately bankrupt since they hold inventory overnight.
    Oct 14 08:03 PM | 2 Likes Like |Link to Comment
  • JetBlue: Moderate Leverage, Strong Performance, Reasonable Valuation [View article]
    Very good article overall. I would caution a bit at looking at the growth of a book vale. JBLU has a large CapEx because it's growing. Therefore, it's forced to plow cash into deprecating assets (planes). This leads to the book value growth and cash flow lagging its earnings.

    Once the company stops growing, the already depreciated assets get turned into cash and the book value growth will start outpacing the earnings. So comparing JBLU book value growth to that of a more mature Southwest may not paint an objective picture.

    Another reason JBLU may perform well because it's an attractive acquisition target due to its smallish size and lower liabilities.
    Aug 30 02:30 AM | 2 Likes Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) - A Comparative Valuation [View article]

    My points are not rhetorical. The ratio analysis here is clearly superfluous. Would be nice to see a DCF model, for example. I just don't see how trailing P/E ratios and P/Book Value can tell anything useful about what company is cheap for reasons I clearly outlined above. I liked your previous TEF article, but this article does a rather poor job in valuing telecoms.

    I can't match any of the numbers even doing cursory "back of the envelope" analysis. How did you arrive at 44% CF/Debt ratio? TEF had about 23b OpCF in 2011 and its debt is 75B $USD.

    I am sorry that I am critical but I should be and my objections are not rhetorical.
    Aug 8 07:27 PM | 2 Likes Like |Link to Comment
  • The China Dichotomy [View article]
    There is another key insight in a disconnect between Chinese buying homes and "not buying" autos. You can't "invest" (speculate) in cars since it's a rapidly depreciating assets.

    This implies that China's real key real estate driver is speculation, not a natural demand for housing. Once the house becomes an "investment", not a place to live, we all know how it ends.
    Apr 14 01:38 PM | 2 Likes Like |Link to Comment
  • An Epic Australian Bust [View article]
    Thank your for taking your time to provide a local perspective. I have corrected a mistake of calling Reserve Bank "Royal" (I must have been looking at someone's article and got confused).

    I take with a grain of salt any pronouncements made by central bankers or government officials. The history is a guide to why:

    Hank Paulson: Subprime mortgage fallout 'largely contained' 03/17/2007
    Fed's Bernanke: Subprime Mortgage Problems Contained 03/27/2007
    Feb 27 07:18 PM | 2 Likes Like |Link to Comment