Michael Goode

InterOil Resists an Orchestrated PR Attack

First, who cares about message boards? Second, this has nothing to do with naked shorting. IOC is easily borrowable for legitimate short selling at my brokers. Third, Barry Minkow has a great record as a fraud-buster and his FDI has uncovered millions of dollars worth of frauds (much of it not at public companies, so his motivation is not simply to make money by short selling companies he investigates). As to the actual report, yes it has nothing to do with whether IOC is a fraud or not and yes it was a bit overhyped.

Of course, the intelligent skeptic still has every reason to suspect that IOC is a fraud or at least prone to hype and incompetence. Despite being 'just around the corner' from major oil finds for over a year, they still have zero proved reserves of oil.

Disclosure: I have no position in IOC.

Microcap Ideas: Photochannel Networks

Well, so far I've been right. :)

I covered my short before the stock fell much, though, so I didn't profit from being right.

Microcap Ideas: Photochannel Networks

How is this a value stock? The company is trading at an absurd P/S ratio (even assuming the Costco contract doubles revenues, the forward P/S is still 4.6, and the company continues to lose huge sums of money), and last I checked, this business is highly competitive and it is DYING! Everybody and their mother now owns a photo printer. Online / mail-order services such as Shutterfly are cheap and high-quality. There has been a clear progression in the industry from everyone going to the photo developer to people printing photos themselves. Sending digital photos to be printed by a store is an interim stage that will see gradual but steady declines in volume over the next decade. Back while in college I worked at an independent photo shop that experienced the digital transition, so I have some understanding of the economics at work here.

Even if Photochannel continues to grow sales, earnings will likely never amount to much because this is a low-margin business. All Photochannel does is offer a website back-end. There are many other companies that have similar programs (such as the aforementioned Shutterfly). There is no reason to believe that Photochannel can outcompete them.

For example, from the company's last 6k, network costs and sales and marketing ate up 61% of revenue. So the company's gross margin is about 39%. Once you add in the necessary high R&D expenses and the G&A expenses, there is little hope for a double digit net margin. I do not believe that Photochannel is an attractive investment at these prices and in fact I am betting against it.

(www.sec.gov/Archives/e...)

Disclosure: I am short Photochannel (PNWIF).

The Impending Mortgage Crisis: Part Three

Good point GeoffB.

The Impending Mortgage Crisis: Part Two

Hey jcrash, I appreciate your perspective. I'll work on a post to explain why I believe your argument is wrong.

The Impending Mortgage Crisis: Part Two

Karchad - so in 2000 did you listen to the market and buy tech stocks? Or in early 2007 did you listen to the market and buy Countrywide? The market is sometimes right, sometimes wrong.

A Tale of Two Oil Companies: Stormcat Energy and Fox Petroleum

Well, it looks like I was right. After accounting for FXPE (now FXPT)'s 5 for 1 reverse split, its current price is $0.61. SCU on the other hand is at $0.97. That makes for a 73% decline in FXPT's stock price and a 26% gain in SCU's stock price. Not bad, eh.

The Impending Mortgage Crisis

Wow - 68 comments. Maybe I should write about housing troubles full time! Thanks for all the interesting comments, praise, and criticism.

As to the question of whether people would walk away, consider that many people move frequently. People who will stay in an area may keep paying, but someone who is forced to move will gladly walk away from negative equity. The more people who do that, the less aspersion society will cast upon those who do it, which will encourage more people to do it.

The Impending Mortgage Crisis

Oh, and I guess I didn't write the article very well. The main point of the article that no one seemed to focus on is that what is going to make this different is that people who can afford to pay their mortgages will walk away when they end up with negative equity. NOBODY has that in their models. That is what is scary. Well, to me that is exciting--now that I took a loss on my house I hope that prices fall much more so that I can buy again.

The Impending Mortgage Crisis

Wow! A lot of comments here. Most of them interesting. I don't have time to respond to all of them, of course, but I wanted to add a couple points.

1. The question of local vs. national. Real estate is local as long as it is driven by fundamentals. The past few years it has been driven by mortgage 'innovations'. The Case/Shiller price index most recently showed declines in all 20 cities (except Charlotte) that it tracks. While some areas will hold up better than others, prices will go down in most places. I tried to give a glimpse of this by using data from California, Philidelphia, and an anecdote from St. Louis.
www.foxbusiness.com/ma...

2. Regarding the importance of interest rates -- jcrash and HARM. I agree with HARM that we need to consider that low interest rates are not a pure good: as they rise (and considering how high inflation is, they must eventually rise significantly), asset prices will decline. Generally speaking, it is better to buy a cheap asset with expensive financing (you can always refinance later) than an expensive asset with cheap money (in which case if you need to sell you will face a loss).

Ryan -- I would love to have a great short idea. There are the homebuilders, the mortgage insurers, regional banks, and the bond insurers. Take your pick. I am short them all in Motley Fool CAPS but none of them in real life.

Sex May Sell, But Is It Profitable?

Regicider -- the problem with the trading down is that none of Rick's online properties are dominant. Why would I go to CouplesTouch.com when I can go to Adult Friend Finder (although I wouldn't go to either). While I will admit to not having experienced the joys of strip clubbery, in a recession people will run out of money (strip clubs are expensive). People may not stop going but they will cut back, and that is what will kill profitability.

Sex May Sell, But Is It Profitable?

@b3rkut -- so you think that strip clubs are as addictive as alcohol and cigarettes? I doubt that--in a recession people will trade down to cheaper options, like the internet.

The whole point about Rick's is that branding is not as useful to it as it is with Wal-Mart. Of course it is not like the staffing firms. But my bet is that it is just as vulnerable to a recession as they are. If I turn out to be wrong about Rick's the most likely reason would be that its management is better at dealing with regulation than its competitors. Regulation is one of the areas in which there are huge economies of scale (eg., having experienced lawyers on staff).

I will revisit these companies in the future and we will see who was right.

Covestor and VesTopia: Winners and Losers from Peer to Peer Investing

I'll second alpha24seven. IB is where the best trade.

A Tale of Two Oil Companies: Stormcat Energy and Fox Petroleum

The independent report is from a company paid by FXPE to cover it. I don't know about you, but if I were paid by a company to cover it, I would realize who buttered my bread and give them a positive view. This is the same reason that Moody's, Fitch, and S&P have been too positive in their ratings of CDOs and other similar structured bonds.

The relationship between FXPE and the company covering it is stated plainly in the report: www.investrend.com/Adm...

Cytocore: More Management by Hype and Distortion

The correction mentioned in my above comment has been made to the article now.