Forex Trading Is Far More Hazardous To Your Wealth Than Commonly Believed
- Data from the US shows that ~60% of active US retail forex traders lose money each quarter.
- The US data suffers from a particularly perverse form of survivorship bias.
- A recent study by French securities regulator AMF tracked individuals over a multi-year period, and found that roughly 9 of 10 of French retail forex traders lost money.
- Aggressive marketing and sales tactics continue to induce retail traders to experiment with currency trading.
- Regulators around the world should evaluate whether additional consumer protections required for the retail Forex industry, as complaints increase.
FXCM January Metrics And PR: Long On Porcine Lipstick, Short On Self-Awareness
- FXCM attempted to spin its January metrics update as a big positive when the numbers, in context, tell a very different story.
- Impression from recent FXCM PR is that company sees itself as returning to "business as usual" without adequately adapting to the aftermath of the SNB shock.
- Reality is that SNB shock was NOT merely a single isolated event; it will produce substantial headwinds in the near term and may fundamentally change the retail Forex industry.
Peeling The Onion Of FXCM's Misleading Marketing
- FXCM's no debit balance "policy" was repeatedly referred to as a "guarantee" in marketing materials, across multiple geographies.
- In a 2009 CFTC proceeding, the complainant was awarded a portion of his lost principal and an entire section of the decision was devoted to FXCM's "Deceptive website."
- FXCM is alleged to have recently used misleading marketing materials apart from their "guarantee."
- FXCM sent demand letters and solicited payment for negative balances.
- FXCM seems to be quietly changing their marketing and disclosures.
Misleading Marketing, Poor Risk Management, And Bad Trade Recommendations Dog FXCM
- Many FXCM marketing materials unequivocally stated traders are not responsible for negative balances.
- FXCM staff members knew its retail traders were overwhelmingly long EURCHF as of October 2, 2014.
- FXCM staff, on FXCM-owned website, were recommending EURCHF trade at least as late as January 8, 2015.
- FXCM allegedly sent demand letters to some customers with negative balances.
FXCM Spin Game Doesn't Change Its Misleading Marketing And Disclosures
- While virtually all media outlets are reporting that FXCM's 1/28 press release is a boon for affected customers, it is not what it seems.
- FXCM has a long history of implying in its marketing and disclosures that clients' are not liable for account deficits.
- By asserting the (dubious) right to collect from customers with account deficits, FXCM is putting lipstick on its pig carcass.
'Tax Inversions' Are Tip Of An Iceberg That Already Cost The U.S. Treasury Hundreds Of Billions
- The Dow 30 components, alone, have collectively disclosed at least $50B in (mostly unrecognized) “deferred” US taxes on foreign earnings.
- US-headquartered multinational companies have accumulated hundreds of billions of dollars (>$630B from the Dow 30) of “undistributed foreign earnings” not subject to US taxes unless and unless repatriated.
- Undistributed foreign earnings disclosures and deferred tax liability (future repatriation taxes) estimation methodologies can vary significantly by company.
- A tax code that incentivizes indefinite foreign re-investment, relative to capital repatriation, is indefensibly bad public policy with an uncertain future - future effective tax rate assumptions should reflect this uncertainty.
USA Technologies Preferred Stock: Bet On A Buyout
- Company has turned the corner to profitability; limited debt and total liquidation preference limit the downside risk of the Preferred security.
- Accumulated liquidation preference is already ~83% higher than the current USATP price, but non-compounding cumulative dividends result in an unusual IRR calculation.
- If the company is bought out before mid-2023, you can earn a 10+% IRR over the holding period, however, longer holding periods result in lower rates of return.
- If you believe USAT is likely to be bought out sooner rather than later, the Preferred shares may be a better bet than the common--with less downside risk.
Consumer Dissatisfaction And Disruption Threaten 'Too Big To Fail' Banks
- Too Big To Fail (TBTF) banks losing market share in mortgage origination and credit card issuing.
- CFPB data shows TBTF banks have more complaints relative to market share than competitors.
- Crowdlending, crowdfunding, and online-first banking threaten to disrupt legacy business models.
- TBTF break-ups would create value for shareholders and consumers, while promoting stability.
- Entrenched management teams unlikely to voluntarily act in shareholders’ interests.
Looming Public Pension Crisis Is Bigger Than It Appears
- Public pension plans are vastly underfunded and imperil state and local budgets over the long-term.
- High credit ratings and optimistic actuarial assumptions mask the full extent of the looming crises.
- Low yields on long-term municipal bonds reflect hunger for yield and obliviousness to underlying risks.
Why 'Too Big To Fail' Banks Remain A Disaster Waiting To Happen
- Bank of America’s accounting error is merely the latest big bank stumble.
- Big banks’ low P/B ratios may be the product of “distorted” balance sheets.
- Big banks’ management of counterparty risk “fails to meet expectations”.
- High leverage ratios, inadequate risk management practices, and overstated asset values are a potentially lethal cocktail.
Luby's: Undervalued Turnaround Play With Balance Sheet Stronger Than It Looks
- Trading below book value, while book likely understates the market value of company's real estate portfolio.
- While recent performance has been poor, Fuddruckers restaurant concept is compelling.
- Company has more than enough runway to successfully execute on turnaround plan.
- Management is heavily invested in the company and aligned with shareholders.
- Company has suffered from macro headwinds that may ultimately reverse.
Travelzoo: An Undervalued Internet Company
- Low valuation, both in absolute terms and relative to comps, seems to undervalue business.
- Roll-out of new booking engine may improve company revenue performance.
- Popular, highly-rated, mobile app allows company to benefit from audience shift to mobile.
- Macro factors/cyclical upswing could also boost TZOO.
There Is An Audible Hissing Sound Coming From The Nasdaq... And The Smell Of Opportunity
- Richly-valued tech/momentum companies have been the hardest hit over the past few weeks.
- Many growth/momentum companies are still richly valued.
- The market is occasionally "throwing the baby out with the bathwater.".
- Value opportunities are starting to emerge again after months of absence.
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- Enterprise Software Valuations Are Still Sky High
- More IPO Madness: Workday Appears To Be Overvalued
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