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Michael Orwin  

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  • Ubiquiti Networks: Two Explosives Set Up For The Tremendous Upside [View article]
    I agree with the author's description of the upside, though I'm not as well informed about it.

    I'm long UBNT, but I'd be more confident about the stock if I knew what was behind the problem in getting and keeping a good CFO. Possibilities include bad luck, Pera not being good at hiring CFOs, and the average CFO getting bored and not progressing their career when they aren't involved in acquisitions and raising cash. Pera's lack of business school attendance may well have been a factor in avoiding conventional expenses, but maybe there's a downside in finding or working with CFOs, or maybe contacts from business school would have been useful. I'm focusing on an area I find uncertain, and obviously there's a lot more to any company than the CFO position.
    Oct 10, 2015. 07:20 PM | Likes Like |Link to Comment
  • Ubiquiti Networks: Two Explosives Set Up For The Tremendous Upside [View article]
    Sir Falstaff - "1) One's net worth proves neither the business model nor management quality."

    It depends on the context. Turning a big fortune into a small fortune isn't clever, but according to Wikipedia , Pera started Ubiquiti with $30,000 of personal savings and credit card debt. If he started rich he would not have used credit card debt. Some founders were temporarily rich in 'paper' terms during the Dotcom boom, but Ubiquiti is not a dotcom style company, having built up net cash while other growth companies rack up debt. Given the context, I regard Pera's net worth as a genuine achievement.
    Oct 10, 2015. 06:59 PM | 1 Like Like |Link to Comment
  • The 'Relative Value' In Value Investing [View article]
    I think if cyber security was breached massively it might end up causing low growth and high inflation. A lot of cryptography is based on big prime numbers. The number of digits in the prime numbers has gone up to keep pace with the computing power hackers can use to find the primes needed to crack the code. I don't think anyone has proved that there wasn't a much faster algorithm that could find the primes, but it's not an area I keep up with. Maybe quantum computers could find the prime numbers. There could be a gap in the occurrence of prime numbers so there aren't any big enough for security but small enough to be used. Switching smoothly to other methods of cryptography depends on having enough time, or a 'plan B'. A more down-to-earth threat is the low security in routers. Apparently the economics of the business mean no company has an incentive to make them safe. It's in an article on . In the event of massive disruption, I don't think investors would be worrying about inflation harming their investments, as there'd be plenty more to worry about.
    Sep 30, 2015. 10:43 AM | Likes Like |Link to Comment
  • The 'Relative Value' In Value Investing [View article]
    I agree, if it's something like 8% inflation and 10% interest rates, then the real interest rate is only 2%. That would not be a drag on stocks, but there will always be other factors, including if inflation would get worse or if interest rates would be hiked.
    Sep 30, 2015. 10:20 AM | Likes Like |Link to Comment
  • A Low Cost World [View article]
    About the Internet of Things, there's a long piece from November 2014, "How Smart, Connected Products Are Transforming Competition" by Michael E. Porter and James E. Heppelmann . Porter is known for his five forces of competition, and the piece is about the effect on business rather than the technology. IoT is described as a third wave of info-tech innovation, potentially bigger than the first two, but the rules and forces of competition remain the same. This is Porter's five forces described on Wikipedia .

    There's a firm called Core2 that monitors the volume of machine generated data by companies. They highlight Boeing and Caterpillar. . The green line in each chart labelled M2M is "machine to machine", which is the relevant line.
    Sep 29, 2015. 09:07 AM | Likes Like |Link to Comment
  • 5 Reasons Why General Electric Has Much Bigger IoT Potential Than Intel Does [View article]
    About acoustic monitoring, one opportunity is reporting tire pressure for a moving vehicle, wirelessly and without batteries (as for RFIDs - radio frequency ID tags). There's some market info in "Acoustic Wave Sensor Market worth $1,183.52 Million by 2020" , but it's not about the technicalities. To report to a driver in the car, sending the info to the cloud isn't essential, it could be easier to analyze in the cloud, or update the software, but it's an extra failure point. If it was used in a remotely operated mine then it makes sense to send the info to the cloud. I've no reason to believe the remotely operated mine has anything to do with Predix. In fact, the miner (Rio Tinto) is mentioned in a GE blog without saying they use Predix .

    GE claim that using Predix is better than paying for bespoke software that will go out of date . IMO that seems reasonable, and it might be why Pitney Bowes are using Predix for a mailing system . It won't apply to all cases. On first principles, Boeing might have decided to make everything Predix for compatibility, but that might risk giving GE too much advantage.

    Boeing have their own "sensor fusion" project, but that's for military planes. The threat picture is shared with other pilots but obviously you don't want to rely on the internet for that. It's not surprising there are some problems, and this link is about a software patch .

    The next link highlights Boeing and Caterpillar as two companies generating vast amounts of data from machines . This might be a leap, but Boeing seem capable of managing IoT without much reliance on Predix. Still, if GE can get some advantage from getting Pitney Bowes and others to use Predix, it spreads the cost of R&D that they need to keep up with other suppliers, and being a big conglomerate also spreads the cost, at least in theory.

    I'm just trying to make the best use of info I found on the net, and I'd appreciate comments.
    Sep 29, 2015. 08:27 AM | Likes Like |Link to Comment
  • The 'Relative Value' In Value Investing [View article]
    I'm back with more historical inflation, although I don't expect this one to repeat. In the 1970s there was a recession, oil shocks when OPEC cut the oil supply, and a period of low growth and high inflation sometimes called stagflation (for stagnation and inflation), although the term was more used in the UK. US inflation peaked at 13.5% in 1980, and was cured by Fed chief Paul Volcker who increased interest rates, up to 20% in 1981. Raising rates when the economy was stagnating was a painful but necessary cure, and inflation was down to 3.2% in 1983.

    Stocks didn't do well. Although they didn't do well in a period of inflation, I think it's not surprising because the inflation wasn't caused by too high demand or the money supply being too big, instead it was caused by things that directly affected the real economy. I'd put the oil shocks high on the list, but other things were going on or had happened earlier, like the Vietnam War with conscription, president Nixon abandoning the gold standard, a wage and price freeze, and a social program that might not have been affordable at the same time as a war. A recession from 1973 to 1975 had 11% inflation in 1974. Economists have various competing explanations for what caused the "stagflation".

    So stagflation is a kind of inflation that stocks probably won't do well in, but it wasn't a good time for cash or bonds either. Holding oil and gold might have been best in the period for anyone who got the timing right. I wouldn't call those investments, though I have no problem with anyone holding some gold as insurance.

    For the stock returns, there's a chart here , find "Inflation-Adjusted Data". It's on a log scale so you have to read off the scale to see how big a drop was. The version with dividends reinvested is much less bad, possibly because lower stock prices meant higher yields, which compounded when reinvested. When inflation was killed and interest rates came down, returns were excellent, up to the Dotcom bubble bursting. I've kept off politics, like how much credit to give president Reagan.

    One non-empirical point for any kind of inflation is that eventually, high interest rates will almost certainly be used to control it, which is bad for stocks and bonds. Alternatives are likely to be worse - price and wage controls, or letting inflation rip, risking hyperinflation. Markets are likely to anticipate rising interest rates during inflation, which is bad for stocks, but the alternatives aren't all that good. Cash depreciates during inflation, and gold is likely to go down when high real interest rates are anticipated or when inflation is seen to be coming under control. Stagflation destroyed wealth while it lasted and would have been hard to avoid.

    Another oil shortage looks highly unlikely, and I can't think of anything likely to cause stagflation again, except maybe extreme policy errors.

    Links -
    Stagflation (Wikipedia) (one unlikely sounding factor is not enough anchovies caught off Peru in 1971).
    1973–75 recession (Wikipedia)
    Nixon shock (Wikipedia)
    Historical inflation table
    Sep 28, 2015. 09:14 PM | 1 Like Like |Link to Comment
  • A Low Cost World [View article]
    I can't make the details clear enough without re-writing the FT's article, so I suggest reading it.
    Sep 28, 2015. 02:16 PM | Likes Like |Link to Comment
  • A Low Cost World [View article]
    There's a good piece by John Mauldin which came out yesterday, "Balloons in Search of Needles" . Under "Shale Field Storm Warning" it says how for the shale companies, the cost of servicing their debt is a high and growing percent of their operating cash flow.

    This is just a guess, but I'm wondering if the same hedge funds have been hit by shale, solar and biotech, which are all down though by different amounts and over different periods.

    One thing I got right is "I disclosed that I'm long SUNE, but it's speculative and I'm not recommending it.". They've plunged since I wrote it and they're down 16% on the day right now.

    I've just checked an article on Seeking Alpha from February "SunEdison: A SOTP Calculation Of A Hedge Fund Hotel" by Mokum Research, Feb. 9, 2015 . The article names David Einhorn as manager of a hedge fund that was long SUNE. David Einhorn has been highly critical of shale frackers, as in the link "Einhorn Slams Mother Frackers" in my article.

    I'd like to give credit to Rognola who commented that it wouldn't be good to be in SUNE when the hedge funds were selling.

    BTW thanks for the kind comments.
    Sep 28, 2015. 02:06 PM | Likes Like |Link to Comment
  • A Low Cost World [View article]
    That's a good point and I should have written about it. I'm not expert on it but the Financial Times has an article from July, "US renewables industry seeks tax breaks to compete with gas" . I had to answer three questions about sport to see it. They expect a drop between 40% and 50% (sorry but I'm wary of breaking copyright) from 2016 to 2017, and a much bigger drop for wind power. It's expected to hit the big solar projects, while growth for small residential and business solar will slow.

    Beyond that, the cost of solar modules will keep coming down. I can't say how long the price of gas can keep falling. Eventually the gas will run out, but before that it could run out of finance. Apparently there are proposals to tax shale gas, e.g. in Pennsylvania. It might be harder to tax solar PV so long as it's displacing fossil fuels.

    The falling price of solar modules won't make as much difference to residential, as it's only 30% of the total cost according to this .

    The US tax obviously won't affect other countries, and the solar companies have varying overseas exposure.

    I hope that's some help.
    Sep 28, 2015. 01:35 PM | Likes Like |Link to Comment
  • 5 Reasons Why General Electric Has Much Bigger IoT Potential Than Intel Does [View article]
    It isn't all competition - 'Intel & Cisco Developing “Predix-Ready” Devices for the Industrial Internet' October 9, 2014 (
    Sep 28, 2015. 05:54 AM | Likes Like |Link to Comment
  • 5 Reasons Why General Electric Has Much Bigger IoT Potential Than Intel Does [View article]
    Off topic (not about IoT)

    There's an article from April where the author claims that batteries are on the verge of being competitive with gas peaker power plants, meaning energy could be stored in batteries and then released instead of activating the peakers. "Why Energy Storage is About to Get Big – and Cheap" . That doesn't sound good for gas turbines. Does that seem feasible?

    I'm long GE, but it's a small speculation on their IoT working out.
    Sep 27, 2015. 10:17 AM | Likes Like |Link to Comment
  • 5 Reasons Why General Electric Has Much Bigger IoT Potential Than Intel Does [View article]
    Any thoughts about legal liability if the Predix platform has security failures?
    Sep 27, 2015. 02:03 AM | Likes Like |Link to Comment
  • The 'Relative Value' In Value Investing [View article]
    I'll just mention that for cautious people there's the "half Kelly" which is just "betting" half the size of the Kelly bet, if I remember right.
    Sep 23, 2015. 06:55 AM | Likes Like |Link to Comment
  • The 'Relative Value' In Value Investing [View article]
    That's very true. I hope readers can stand a bit more history.
    British middle class non-earners relied on long dated and perpetual government bonds for a fixed income, yielding about 3%. It was reliable for a long time, but the 1st World War caused double digit inflation and many of the bond holders faced poverty. Their income would have been safer in stocks. The government also cut the interest rate on bonds in 1889, with inducements but they had to pass the National Debt Redemption Act to force it on the holdouts. The inflation figures are on .
    Sep 20, 2015. 11:20 PM | 1 Like Like |Link to Comment