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  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    Dr. Shiller deserved the Nobel Prize.

    -- Dr Shiller has done important work in econometrics; particularly the thorny problem of generating a useful time series out of lumpy and unlike kind transactions such as housing. The Case Schiller Index is far more important than CAPE to economists.

    The other key work was his evaluation of stock prices as a present discounter of future cash flows; he put together the hard data that they were unreliable in that respect. The Nobel Committee noted "He found that stock prices fluctuate much more than corporate dividends," and this was a big deal. Efficient market theorists have argued that stock prices reflect rational assessments of future cash flows-- Shiller clearly showed that they don't.

    "Shiller's CAPE ratio appears to have little predictive power and is usually bearish.
    CAPE ratio and other "predictive" measures of stock prices will be victims of their own success."

    -- As noted, see today's Wall Street Journal [8/22/2014] for evidence to the contrary.
    "Yes, Virginia, You Can Time the Market"

    As "victim of its own success", hard to see how that could apply to CAPE. There _are_ corellations which if widely noted and traded on, will evaporate the opportunity that they observe. Its hard to see how CAPE falls into this category, its an observation about the equity markets as a whole, and there's no great mass of funds trading CAPE based strategies.

    What's important about Shiller's work is that he identifies both real trends in asset values (including the poorly appreciated "people don't make money owning housing") _and_ the reason that asset prices may diverge from fundamental values.

    What neither he nor anyone else knows is _when_ asset prices will revert to their fundamentals. Obviously the risk goes up as the CAPE expands, just as your risk of a heart attack goes up as your weight and blood pressure rise . . . but "risk" doesn't tell you "when", and indeed, it doesn't even guarantee that it will happen, just that its more likely.
    Aug 22 12:52 PM | 3 Likes Like |Link to Comment
  • Kinder Morgan: Mega Merger Enhances Dividend Growth Story [View article]
    The questions about LINE are of very long standing; the problems with their accounting and skepticism about just where their dividend comes from is well documented.

    The market reflects this skepticism: Do you think that you can swap a %5 distribution yield in KMP for a %9 distribution yield in LINE without taking on more risk?

    The only question: Do you know what the risk is? Apparently you don't.

    There is no free lunch, and there's no indicated distribution yield of %9.30 without substantial risk.
    Aug 16 03:02 PM | 1 Like Like |Link to Comment
  • Kinder Morgan: Mega Merger Enhances Dividend Growth Story [View article]
    Do not assume that "yield" means anything much in the case of LINE.

    You could buy Google, and sell %10 of your position each year, and say that it "yields" %10.

    LINE sends out checks, sure. But what kind of financial operation generates that check? Is it real, or is it borrowed? The question is: does LINE _earn_ its yield? KMP did earn its yield, and then some. With LINE, you don't really know.
    Aug 16 01:39 AM | 1 Like Like |Link to Comment
  • Kinder Morgan: Mega Merger Enhances Dividend Growth Story [View article]
    Linn Energy is a very different proposition from Kinder Morgan. The appeal of KMP was the quality and reliability of the operation; with Linn, you're looking at even more financial engineering

    For someone burned by Kinder Morgan's finances, Linn can't be that attractive, they are more like an energy hedge fund than a producer.

    Much, much, much riskier than KMP.
    Aug 14 07:48 PM | 1 Like Like |Link to Comment
  • Kinder Morgan: Mega Merger Enhances Dividend Growth Story [View article]
    @Be Here Now:
    I will vote my units against this, but I can't complain too much.

    My interests would be best served by holding KMP forever-- so I will vote my KMP units against. I also own some KMI, purchased quite recently; this position benefits from the acquisition.

    Still KMP is a much greater position than KMI, and I was enjoying a very agreeable tax advantaged income from it. I didn't expect much increase in KMP distributions from here (that's why I'd added some KMI, rather than KMP), but at a yield on original cost exceeding %15, I didn't need any more to be satisfied.

    In real estate partnerships, when faced with a big tax liability on a sale, you have the opportunity to escrow and do a 1031 exchange, deferring taxes, but I don't see any way to do this with an MLP.

    I think the combined entity is likely to be successful, but the tax "gotchas" of the transaction underline my previous comments about KMI-KMP, that there are real conflicts of interest between management, investors, and entities.

    So I'd say: not so great for KMP unitholders, but long term KMI is a buy. They're a high quality operation in a field which is booming.
    Aug 13 07:46 PM | Likes Like |Link to Comment
  • Kinder Morgan: Mega Merger Enhances Dividend Growth Story [View article]
    Many KMP holders, like myself, will have chosen the MLP precisely because it is more tax efficient for them -- or was. This is, or was, particularly the case for folks in the top tax brackets; an investor in lower brackets generally has less reason to seek tax advantaged investments.

    So its a lousy transaction for me, and for other holders paying top tax rates who've held a long time.

    It _is_ a good transaction for Richard Kinder.

    None of that is surprising; just as the KMI-KMP structure reflected the interests of the largest shareholder, so too does this transaction.
    Aug 13 01:21 AM | 1 Like Like |Link to Comment
  • Kinder Morgan: Mega Merger Enhances Dividend Growth Story [View article]
    @jlwest "this may not be such a great deal"

    --looks like that to me, too, for a KMP unitholder

    Regarding Taxes, see page 11 of the KMI presentation:

    "Based on KMI’s 8/8/2014 closing price of $36.12, taxes for an average unitholder are estimated to be $12.39/unit. Based on an assumed KMI price of $44.44 ($2.00 dividend and a conservative 4.5% KMI yield), taxes for an average unitholder are estimated to be $16.41/unit. These represent approximate calculations for an average unit holder. Actual gain could be more or less. Assumes passive losses have not been utilized and can be utilized on the sale to offset ordinary income. Assumes individual tax rate of 35% for ordinary income and 22% for capital gains for illustrative purposes. If the maximum federal rates of 40.5% for ordinary income, and 23.8% for capital gains are used, approximate taxes are estimated to be $13.81/unit and $18.16/unit at KMI prices of $36.12 and $44.44, respectively. KMP unitholders will receive basis in KMI shares received equal to KMI’s price at closing. "

    The tax burden to KMP investors is substantial, and means that there's not likely to be any after tax gain for them, and particularly for folks who've held for a long time, there will be a very big tax bill, and the transaction may well be a net minus.

    To me it appears to be a deal which is of much more benefit to KMI shareholders and Richard Kinder than it is to KMP unitholders, particularly folks who've held for a long time and will have a very large capital gain.
    Aug 11 05:43 PM | Likes Like |Link to Comment
  • AMD: The APU And High Bandwidth Memory - Maintaining Graphics And Total Compute Performance Leadership [View article]
    @Vlad Hristov

    Care to revisit your bit of ad hominem, now that AMD has disappointed yet again?

    To be clear: I posted on 14 July: AMD stock price was $4.74
    just five days later, AMD disappointed for the n+1th time -- and dropped %25 in a day (its since recovered a bit, but still down dramatically from when I posted)

    So who has been "served and crushed by [their] own foolish comments"?

    As I've noted time and again, AMD is a serial disappointer.

    I'm not quite sure why a consistent loser has managed to attract such partisans, but its amusing to watch them twist and turn with "just you wait till next quarter".

    Sure. It'll all be better next quarter. Or next year. Or sometime.

    'Cuz it says so on this "roadmap"
    Aug 11 05:39 PM | Likes Like |Link to Comment
  • AMD's Conservative Guidance [View article]
    Sean, what you call "negativity" is richly deserved skepticism.

    AMD is a serial disappointer; if management has decided to guide low in order to frame a future "beat", well good on them. That would be something new and welcome.

    Based on where we've been, though, they're guiding low because it doesn't look like they can do any better.
    Jul 24 06:24 PM | 2 Likes Like |Link to Comment
  • Blue Chip, 11% Dividend American Capital Agency May Be A Good Place For Your Money [View article]
    No, I don't mean what you're implying.

    mREITs are effectively a levered mutual fund. That's not criminal, you can find levered bond funds if you like. But you can't look at the financials of an mREIT and look for things like "sales" or "P/e ratios".

    So my meaning was: look at an mREIT the way you'd look at an ETF or mutual fund, not as an ongoing "business". The financial metrics are very different. You want to look at things like the spread, the duration of the portfolio, NAV, and their repo arrangements rather than P/E or P/s ratios . . .
    Jul 20 10:38 PM | 1 Like Like |Link to Comment
  • Blue Chip, 11% Dividend American Capital Agency May Be A Good Place For Your Money [View article]
    @peapaw: " P/S ratio just under 11 and share price near its 1 year high, at this point I am not a buyer."

    P/S ratio means nothing in an MREIT. They don't have "sales": they own a pile of MBS, and use a lot of leverage to do so. Whether the share price is cheap or rich at $11 is not a matter of price history, its a matter of NAV.

    As others have noted, its a mistake to think of an mREIT like a "business".

    Its a portfolio. Sometimes you want a leveraged MBS play in your portfolio, sometimes you don't . . . nothing to do with price history or price to sales.
    Jul 18 08:49 PM | Likes Like |Link to Comment
  • AMD: The APU And High Bandwidth Memory - Maintaining Graphics And Total Compute Performance Leadership [View article]
    "And you mention "The likelihood that a serial rebooter will succeed with nth reboot has is not unrelated with the size of n."
    You've made several assumptions in this statement, providing no supporting facts or numbers or what n is."

    I would invite you to take a look at Intel's many "mobile roadmaps" of the last decade as exhibit 1

    Nvidia's many Tegra roadmaps as exhibit 2

    AMD's many roadmaps -- well, re-engineering of anything and everything to do with their company and announcing some whizzy new bit of technology which gets fanboys hot and bothered as exhibit 3

    None of them amounted to anything. Intel still has next to nothing in mobile, despite spending a decade and fortunes of money trying to get get some market share.

    Nvidia still has nothing with their Tegra

    And AMD's umpteenth reboot will likely end just as their others have. You can have as many examples as you like of their attempts to enter new markets ("Spansion"), their re-engineering of the company (Global Foundries), and innovation in CPUs ("Bulldozer") which all have left the stock at $4. This is a company whose stock sold for more in 1984 than it does today! In the space of 30 years, they've lost 2/3 of their value. Its not a good record.

    As to the profitability of their CPUs, it all depends on how much money Intel leaves on the table for them. For anti-trust reasons, Intel has a strong interest in AMD's continued existence as a largely crippled "competitor". They'll leave them something, enough to live, not enough to threaten.

    GPUs are a question mark. There remains a very profitable high end GPU business for NVDA and ATI; but the Bitcoin miners added a new and distorting demand into the story. There is some upside there, probably not much downside-- there will always be an enthusiast and professional market for high end graphics. Whether their continues to be a demand like the Bitcoin miners is really an open question.

    By my analysis, AMD is a stock for traders-- it'll bounce up and down, bulls will enthuse over the nth roadmap, and will do well to sell before it becomes the n+1th disappointment.
    Jul 14 04:42 AM | Likes Like |Link to Comment
  • AMD: The APU And High Bandwidth Memory - Maintaining Graphics And Total Compute Performance Leadership [View article]
    "In short, you appear to be stating that AMD is forever cursed to fail no matter what it does."

    Nope. I'm just saying that in the tech space in particular, when new folks try to enter a market dominated by some other player, you have to apply a great degree of skepticism. "Hard to win" is different that "cursed to fail"; but my comments reflect a consistent pattern here on SA to look at technology roadmaps outside of the very competitive business context in which they'll be executed.

    AMD can and does make some money in CPUs and GPUs. They can grow that business a bit, and they could make it drive a much more profitable company. But they're not going to enter some market dominated by other folks and suddenly do better than they've done in their core.

    Look at their foray into flash memory. That was a "good idea". A whole bunch of people make boatloads of money in it; SNDK is worth $20 Billion. And yet, there was AMD, with their Flash venture, Spansion.

    SNDK -- worth $20 Billion. Spansion -- Chapter 11.

    AMD has not had a shortage of good ideas. They simply play in markets that are exceptionally competitive, and where a buzzy roadmap might get you some enthusiast press, but it won't get you market share.
    Jul 13 08:42 PM | 1 Like Like |Link to Comment
  • Sell Singapore, Buy Sri Lanka [View article]
    Thank you for the local view . . . yes, Mt Elizabeth is what I meant. And yes, its of concern when someone an ocean away is more bullish than a local!

    My thesis is relatively simple: the market has discounted China-world share values because of lack of transparency. Look at Alibaba, for example-- and just how much wealth got lifted from Yahoo and Softbank by Jack Ma & Co.

    IMO there's a "heads I win, tails you lose" discount being built in to China shares-- and makes Singapore's lack of corruption a mis priced asset; if you've got a reliable partner at 14 times earnings, and an unreliable one trading the same-- which should you buy? Now Shanghai is now trading cheaper than that-- under 10x, to my mind a measure of just how uncomfortable investors are with the rules of the road on the mainland.

    Singapore represents an alternative vision, one which was attractive to many Chinese (not least, Deng Xiaoping).

    My guess is that Singapore will end up filling their hospitals with folks who're picky about the provenance of their implants, and the credentials of their surgeons; but its troubling that it hasn't happened yet-- %20 capacity isn't just disappointing, its terrible.

    I look forward to more from you; great to hear from a local. Do you have any feeling about Vietnam? It seems to have some of the upside of Sri Lanka, but with more easily accessed investment options.
    Jul 13 03:51 PM | Likes Like |Link to Comment
  • AMD: The APU And High Bandwidth Memory - Maintaining Graphics And Total Compute Performance Leadership [View article]
    No, I don't short $4 stocks. For me to go short, I need a fundamentally bad macro story, a stock at high levels, and a catalyst. The last such stock was Blackberry, a few years back.

    I don't try to squeeze blood from a stone, and while this market doesn't have good values, its a scary short.

    I'm not buying tech shares in the public market here; the only new buying I'm doing now are second rounds in private companies I'm already invested in.

    As an individual investor, you have the huge advantage of patience; and my bet would be you'll have a chance to buy a great company at a better price than today's, in the next 18 months.
    Jul 13 03:02 PM | 1 Like Like |Link to Comment