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Martin Vlcek  

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  • Another Look At Seadrill's Balance Sheet [View article]
    "Therefore, even if every newbuild order ended up being cancelled, the maximum cost to Seadrill would be $2 billion. And that would be a balance sheet asset write-off but would not cost Seadrill any cash since the $2 billion has already been paid to the rig builders"

    This looks like a very good idea with roughly zero net cash impact and lower future cash outlays and lower future maintenance outlays.

    Unless partially build newbuilds can be liened/mortgaged to allow easier debt refinancing, which I doubt.
    Mar 5, 2015. 06:29 AM | Likes Like |Link to Comment
  • Another Reason Investors Should Not Buy Seadrill's Stock [View article]
    PDR, thanks for this great overview of the holdings. I didn't know SDRL has at least some indirect exposure also to the shipping industry, which is also depressed so the valuations are bargains if the companies survive, which Fredriksen Holdings can make sure happens as they can shift cash between companies to conserve cash.

    Perhaps the best investment would be to buy the Fredriksen Group / HEMEN HOLDINGS LTD company but I guess it is not publically traded. I haven't checked.
    Mar 5, 2015. 05:58 AM | Likes Like |Link to Comment
  • One Reason Investors Should Not Buy Seadrill's Stock [View article]
    I am glad SDRL didn't announce a buyback. It is further confirmation they have prudent cash flow management in mind and not short-term perceived security of the stockholders who are used to the Bernanke put and mostly bought for the dividend and are now looking for a SDRL put on their stock.

    SDRL has been through multiple downturns like this one and know cash preservation is paramount as cash will me more and more king down the road. Why buy now? It's too soon and they can either buy cheaper or buy cheap assets of bankrupt competitors.

    SDRL cutting their dividend was actually one of the reasons why I *bought* the stock for the first time because I see they are willing to do the right things for the long-term benefits of SDRL, not the next one or two years.
    Mar 5, 2015. 05:41 AM | 1 Like Like |Link to Comment
  • Seadrill's Cup Is Much Smaller, But It Is Half Full [View article]
    Casey, thanks for an excellent balanced analysis of the SDRL situation.

    SDRL is my only long in the oil drillers sector (I bought @~$15 after the dividend cut) but I keep selling close OTM calls on the position to wait out the turmoil and profit from higher volatility. SDRL is a speculative play but the potential reward is worth the risk IMO.

    Although I am bullish on SDRL in the long run, I always try to challenge my thesis, so let me ask you. How safe is the backlog really if the other side of the contract doesn't cancel but goes bankrupt instead? Is the insurance from cancellation really safe? There is always counterparty risk and it is always magnified in times of turmoil (2008/2009 for example).
    Mar 5, 2015. 05:35 AM | 1 Like Like |Link to Comment
  • John Hussman: Plan To Exit Stocks Within The Next 8 Years? Exit Now [View article]
    The ultra low NAV could be a good contrarian indicator that investors have capitulated on all prudent, defensive strategies.

    But I have a problem following Hussman's logic in today's market.

    He is using past data to create future expectations. His strategy is not better than any, he just chooses the last 50 or 100 years of market data, analyzes it and makes conclusions based on this short timeframe about what is a cheap and expensive market.

    The cheapness or expensiveness of the market depends on the future outcome.

    Hussmann reminds me of the Early Buffett who waited for the rock-bottom prices (cigar butts) and bought distressed companies for a quick gain but poor long-term growth. Later Buffet realized it's better to buy great companies even at average or slightly high prices because the companies can outgrow their higher valuation quite fast. And that's what's been happening. Hussmann keeps waiting for rock-bottom prices and may miss several decades of investing while the seemingly expensive market simply outgrows its P/E over time.
    Mar 3, 2015. 06:17 PM | 3 Likes Like |Link to Comment
  • John Hussman: Plan To Exit Stocks Within The Next 8 Years? Exit Now [View article]

    My advice is always to respect yourself:) Yes, listen to others but don't follow them blindly. They have their specific needs, beliefs, biases, etc.

    Listen to your own inner voice. If you are not comfortable investing at the current highs, you should get out because otherwise you will be shaken out at the bottom.

    If you are sure you are truly along-term buy and hold investor, just keep buying *individual stocks* that are currently out of favor or simply undervalued and you will do best for yourself.

    Every recession and bear market is different. Maybe this time we will see volatile sideways action for five years, which will help decrease the P/E rates to attractive levels, and maybe we will have a violent rally followed by a bust. Nobody has a crystal ball, so don't spend too much time guessing where the market will be. Rather analyze individual stocks and buy the cheap ones.
    Mar 3, 2015. 06:06 PM | 3 Likes Like |Link to Comment
  • Warren Buffett's Berkshire Hathaway Portfolio: A Free Cash Flow Scorecard Analysis [View article]
    I wonder if he sold so decisively because he had a recent bad experience (regrets) with not selling out of Tesco fast enough. So I guess he didn't want to take his chances this time. He knows there will be other opportunities even if he couldn't get back to XOM.
    Mar 2, 2015. 11:58 PM | Likes Like |Link to Comment
  • 3 Strategies To Capitalize On The Impending Rally In Crude Oil While Avoiding Contango [View article]
    Auch...that's a lot of business for brokers.

    You really should talk to your broker about lowering commissions or have 2 brokers, each optimized for certain trades (one for high volumes at a flat fee and one for trading lower number of contracts.

    Also, think about what percentage of your profits/losses did the commissions make over the last couple of years? If it is more than a few % of profits, then you could be better off trading less. But I understand it is less fun to trade less:).

    And finally, commissions are only the first level of costs. But they are a sign of the usually much larger costs of trading - the bid-ask spreads that don't show up anywhere on your trading reports but they eat away lots of money.
    Mar 2, 2015. 02:45 AM | 1 Like Like |Link to Comment
  • Why Even Herbalife's 'Adjusted Earnings' Guidance Is Much Worse Than You Think [View article]

    I am neither long nor short HLF, just curious. How does the MLM business model, such as HLF, Avon, cope with the surge in internet (online and mobile) shopping vs. the traditional door-door/middlemen MLM business model? Is it possible to order the products online/through a mobile app and/or have them delivered to your home via a post package delivery, such as Amazon for example?

    Thanks for your thoughts on this.
    Mar 2, 2015. 01:32 AM | Likes Like |Link to Comment
  • Anatomy Of A Short (Or Long) Part 8 - A Live Case Study Using Herbalife - Secular Industry Shifts [View article]
    I have friends that received phone calls with such offers, for example. And the 50:1 and 100:1 leverage is plain insanity to offer. People are almost guaranteed to be wiped out over time, and it is legally offered.

    And the automatic stop loss creates an impression that you can't lose money yet in reality, the stop loss imply means the order is converted to a market order at the time and if there is turmoil the price you get is much worse than your initial stop loss price so you can lose multiple times of what your invested funds. For example in the case of the USD/CHF move recently. Most people don't understand these pitfalls. I am just trying to warn them and point out that MLM is not more evil or dangerous than the currently allowed forex and other investing rules.
    Feb 28, 2015. 11:08 AM | Likes Like |Link to Comment
  • Why Even Herbalife's 'Adjusted Earnings' Guidance Is Much Worse Than You Think [View article]
    "At $1.35 this year, based on a fully diluted share count of 85.5 million is about $115.4 million in adjusted net income, compared to $125.1 million, or a decline of nearly 8%"

    One interesting aspect of the falling EPS is that the more the price falls, the higher % of EPS fall HLF is able to mitigate just by buying back its own shares. The higher the FCF yield is as the price falls, the more it can buy and squeeze the shorts.

    Disclosure, I am watching from the sidelines, neither long, nor short HLF, just curious.
    Feb 27, 2015. 11:08 PM | 5 Likes Like |Link to Comment
  • Anatomy Of A Short (Or Long) Part 8 - A Live Case Study Using Herbalife - Secular Industry Shifts [View article]
    "Herbalife is a black hole of lies to rip off the naïve"

    The same is true of those Forex brokers that advertise 50:1 or 100:1 leverage and "guarantee" that investors can't lose more then they deposited (automatic stop loss which doesn't always work if market moves fast). Or those "guaranteed" investment products that promise 30% returns and max. 20% drawdown forever. Yet such products are still offered to new naïve "investors" and nobody is doing anything about it. So although I may not agree with the MLM business model, as a rational investor I am careful to expect a significant regulatory repression on MLM industry. But MLM seems to be a crowded place, so it will probably collapse from overcapacity, too much competition chasing the same market.
    Feb 27, 2015. 11:00 PM | Likes Like |Link to Comment
  • Why I'm Long SodaStream [View article]
    Mr. Tilson bought SODA at $40 as per his presentation, claiming he was early and we have a great chance to get in SODA even much cheaper. But then on another slide he claims SODA's valuation is $40. So the story clearly deteriorated since he bought. He would not have bought with zero upside potential. And the same can keep happening - knife can keep falling and valuation as well. He is probably trying to get out of SODA or boost the price to cut his losses as he realized he caught a typical falling knife and bottom may be nowhere near. Perhaps he was gambling on a buyout by someone like Pepsi? Who knows.
    Feb 27, 2015. 09:27 PM | 2 Likes Like |Link to Comment
  • How To Rebalance A Market Neutral Portfolio [View article]
    Fred, how do you measure % performance of a portfolio of $100,000? Do you measure it by using a $100,000 long position hedged by a $75,000 short position ($25,000 in 3xleveraged ETF), or by using a $57,000 long hedged by a $43,000 short position ($14.300 in a 3x leveraged ETF)?

    Or are you using just the sum invested in the SPXU as a leverage factor ($25.000 in SPXU on a $100,000 long position would be a 25% leverage if you have to borrow that $25,000 for the hedge, even though the theoretical notional value of the short is $75,000.

    Or the portfolio of $100,000 would be $80,000 in longs and $20,000 in SPXU to be 75% hedged? Maybe I am overcomplicating what I mean to ask.

    In other words, how do you treat leverage in performance measurement?

    Also, do you use leverage in the real portfolio? If so, how high? Theoretically you can lose more than you invest if you use any leverage, even though the chances are very small when you use a broad index as a hedge instead of individual stocks which can easily be in a short squeeze as you mentioned (Volkswagen).
    Feb 26, 2015. 01:49 PM | Likes Like |Link to Comment
  • How To Rebalance A Market Neutral Portfolio [View article]
    Interesting article. Thanks.

    Re. futures vs. SPXU, you could use futures up to the "whole" amount of futures, and hedge just the rest with SPXU.

    Shorting a 3xlong SPY ETF could be a better way to hedge than going long the SPXU due to the leverage losses "built in" the 3-leveraged products (works most of the time that way).
    Feb 26, 2015. 01:45 PM | Likes Like |Link to Comment