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Michael Allen

 
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  • Why Corporate Earnings Could Drop More Than 50% [View article]
    For this article, I use NIPA earnings, not S&P earnings/share, so stock buy-backs do not have any effect.
    Aug 2, 2012. 12:20 PM | Likes Like |Link to Comment
  • Why Corporate Earnings Could Drop More Than 50% [View article]
    Funny you should ask. Its in process. Please stay tuned.
    Aug 2, 2012. 12:13 PM | 1 Like Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    How do you get comfortable with all the fraud in the US? The answer is that you never get comfortable. You always hedge your bets, and never be surprised if any of them turn out to be wrong.
    Aug 1, 2012. 10:16 AM | Likes Like |Link to Comment
  • Turning The World's Most Successful Investment Strategy On Its Head [View article]
    Well I did suggest that I was turning PP on its head, and I'm not calling mine permanent, so I suppose I should thank you for noticing. The point is, the PP benefited from things that are no longer true, namely low valuations. If you do the math, it is impossible for PP to achieve anything like the returns it did before, and quite likely that it will lose money going forward.
    Aug 1, 2012. 09:40 AM | 1 Like Like |Link to Comment
  • Turning The World's Most Successful Investment Strategy On Its Head [View article]
    There is no algorithm for determining the asset allocation. The allocation is 25% to each asset class, rebalanced annually. I use a different model to decided whether or not to go long or short each asset. I use leverage on the long side, not on the short. There are no neutral positions - it is either long or short each asset class. Although it is possible to find out, I do not know what the net effective exposures were at any given time. The back-testing process was to develop a theory about how a particular market works, test this idea and optimize over a 10 year period not including the most recent 2 years. We then tested the model on that two-year out-of sample period as well as the previous 33-year out of sample period and were able to confirm our ideas. It is still entirely possible that the models won't work going forward. I use them as a guide, not a rule, but I will not personally bet very heavily against them.
    Aug 1, 2012. 09:20 AM | Likes Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    All fairly reasonable points, but no one is predicting deflation here and my arguments are certainly not purely focussed on the US. The point is to find cheap alternatives to the bond-portion of your portfolio, which is a portion you would have not necessarily because you expect deflation, but rather because you don't know. It would make a great deal of sense, in my view, to be long emerging markets equities and short US equities but that's for another discussion.
    Jul 31, 2012. 10:03 AM | Likes Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    A fair point I suppose. Much is left out of this article for future discussion, so that I could just focus on bonds. My strategy is to alwasy be exposed to assets that protect against all four of the key risks: expansion, contraction, inflation, deflation. If I buy the least expensive of these, and sell the most expensive, I think I will make out better than if I only held cash, which is the logical conclusion that your suggestion would lead to. I do own equities, but not US equities.
    Jul 31, 2012. 09:50 AM | Likes Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    Well then as long as we agree that profits are mean reverting, I think my strategy will work. As for Montier's formula, first, I suppose it could be a coincidence that the formula exactly equals earnings in every quarter that data is available, less about 2% for data reporting errors since 1969. Do the math. Second, stocks and bonds are not productive assets. Third, it's not Montier's formula anyway, it was first derived in 1914 by Jerome Levy. If you'd like more information on it, I would suggest http://bit.ly/Q9FesG
    Jul 30, 2012. 08:32 PM | 1 Like Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    No problem with these. I try to keep it simple, that's all.
    Jul 30, 2012. 08:15 PM | Likes Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    I realize that they are designed for day-traders. Long-term holders pay a price, but with major liquid indeces, the cost is not prohibitive in my opinion. All of the alternatives, such as buying options, or borrowing money, have costs as well and are riskier in my view. There's no free lunch. I generally don't expect to hold the geared funds long enough for these costs to compound. You could hold SH, which is an ungeared inverse ETF for the S&P500.
    Jul 30, 2012. 08:11 PM | Likes Like |Link to Comment
  • Amazon.com: The Fantasy Keeps Growing [View article]
    I appreciate that you've looked at this a lot closer than I have, but I'm starting to get concerned that you are not allowing enough for the normal seasonality of the busienss. Since 2008, the company has increased cash flow from operations in every 4th quarter. They have also increased the cash outflow in Q1 in every year. They have increased Q2 cash flow two years in a row, but mostly this quarter is random. Q3 has been down two years in a row. So far as I know, nothing has happened this year that is out of pattern. Getting ready for the 4th quarter is not an incredible excuse. It's a normal part of their business. I don't know why the stock is so damned expesive either, but this doesn't make it a bad company, just an over-valued one.
    Jul 29, 2012. 08:15 AM | Likes Like |Link to Comment
  • Amazon.com: The Fantasy Keeps Growing [View article]
    As for everyone knowing the fundamentals, you can read articles on SA that were written by people who clearly haven't read any of Paulo's pieces. How could you not even check for alternative opinions in the publication you are writing for? It never ceases to amaze me what people can conclude without actually knowing anything, and it often seems that the less they know the more convinced they are.
    Jul 28, 2012. 12:33 PM | 1 Like Like |Link to Comment
  • Amazon.com: The Fantasy Keeps Growing [View article]
    To be fair, not a lot of retailers make any money in the first three quarters, and Amazon is just a retailer with big ideas. Expectations for the 4th quarter still don't seem right to me either, but I have a hard time focussing on what they did or will do in the 2nd and 3rd quarters.
    Jul 28, 2012. 12:07 PM | Likes Like |Link to Comment
  • Amazon's Cash Is Not Amazon's Cash [View article]
    Incidentally, Amazon's defensive interval, which measures the company's ability to use net cash and net receivables to pay its bills if sales suddenly grind to a halt, is 65.1 days. Berkshire's interval is 220.8 days and presumably Berkshire's would be even higher if they were not cosistently finding new places to invest their cash. Berkshire has enough time to make a decent return on investment. Amazon really does not.
    Jul 21, 2012. 12:04 PM | Likes Like |Link to Comment
  • Amazon's Competitive Advantage, Growth Opportunities Make It A Buy [View article]
    Only one of the companies in your basket has a higher price to sales ratio than Amazon, so why even include the others? You are making the argument that Amazon's sales are comparable to Ebay's, which is the most incredible nonsense I've ever heard. EBAY has a 5-year average gross margin of 72%. Amazon's is 22%.
    Jul 20, 2012. 10:00 AM | 1 Like Like |Link to Comment
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