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The One Eyed Guide ( is Bob Small who: solo traveled to 25 countries by age 21, has a degree in Economics, an MBA from Columbia University in Marketing and Finance, has been a brand manager, was a licensed stock and options broker during the 87 crash, ran a $450... More
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  • Auto Sales still in L
    The April SAAR automobile sales rate of 11.21 million per year shows that automobile sales are range bound between 10.4 million and 11.8 million.  Of concern is that the latest data benefits from changes to seasonal adjustments.  If the April 2010 data had been adjusted using the same seasonality as April 2009 the Seasonally Adjusted Annual Rate would have been 11.06 million instead of 11.21 million.

    April 2010 SAAR Chart
    Not much hope that sales will increase above this range without a stimulus due to the basic oversupply of existing vehicles in the United States.  This is similar to the housing problem and is a result of the debt expansion from 1980 to 2008.  Durables like housing and automobiles that are in oversupply should be the last to benefit from a economic recovery without specific government help.

    Time for another stimulus?  Keynesians say yes to get the recovery started but experienced marketers wonder when repeated consumption stimulus (instead of basic fixes like jobs creation) loses its effectiveness.

    Disclosure: No Positions for this post
    May 04 12:31 PM | Link | Comment!
  • Defining the Tipping Point
    The facts on the U.S. equity markets are pretty clear:
    1. The markets are valued for a V-shaped recession/recovery.
    2. The retail investor is pulling money out which is reducing trading volume.
    3. Institutional investors are all in (cash in portfolios is very low.)
    4. The market is supported by massive liquidity injections which have lowered interest rates, increasing the tolerance for risky assets.
    5. A lot (maybe almost all) of Hedge Funds are fully leveraged.
    The tipping point in the market is probably not any of these but a 6th point that is not in play yet: 
    1. Properly invested hedge funds can make money on the way down and how to do this is well known.
    Probably every hedge fund has a plan on how to take advantage of the expected correction.  The question is what will happen in the market when every hedge fund tries to execute their correction strategy at once?  In 1987 universal use of portfolio insurance resulted in a 20% one day drop in the S&P 500.

    I was a broker in '87 and saw the Fed rescue the market by knocking yield on the long bond down 1.3 percentage points in a few days as shown on the chart below.
    October 1987

    Back then, the long bond was yielding 10.24%, today (1/12/2010) it is at 4.64% so there in not as much room for a Fed rescue.

    If you manage a Hedge Fund you need to ask yourself:  "Can I define the tipping point well enough to execute my plan before the market jams?"  If the answer is No, you need to rethink your correction strategy because the Fed net is not as strong as it was in 1987.

    Disclosure: Short Market
    Jan 12 2:48 PM | Link | Comment!
  • Is Virgin Galactic Spaceship 2 Designed For Tourism or Transportation?

    Virgin Galactic’s Spaceship 2 is going to start single site suborbital tourism flights in 2011 (up into space and back down to the same site.)  The question is when does space tourism become suborbital point to point (NYSE:PTP) transportation?    The answer is “How far do you have to go before it becomes transportation?”

    Spaceship 2 is designed with a hybrid engine that is basically replaced after each flight.  Simply putting an engine with more fuel capacity on it will give it greater range. If the expanded range is West to East Coast or West Coast to Hawaii (2500 miles) then this is real transportation.  As the listed atmospheric speed is 3.5 Mach (2500 MPH), there should be no problem achieving 2500 miles.  NY to Abu Dhabi (6800 miles) or LA to Hong Kong (7200 miles) will probably require a next generation Spaceship 3 but there has been no information released on the possible range of Spaceship 2.  Upping the load until the limits of a vehicle's design are reach is a pretty standard step in development and usually attains unexpected performance (though Burt Rutan probably knows where the limits are already.)

    An example of this approach is the development of the Ford AC Cobra vs. the GT40.  Carroll Shelby had AC drop a really big engine in a relatively primitive but existing body and got a vehicle that was a winner for relatively short races.  To win the 24 hours Lemans (and achieve the much higher speeds needed), Ford started a ground up development project that resulted in the GT40.   This is similar to the need for short coast to coast PTP versus the longer intercontinental PTP.   (The inspiration for this post is below. How would you like both of these great investments in your garage? Or better yet be the owner’s son: “although the GT handles like its on rails, the AC is much more fun taking (slinging) around a decreasing radius curve.  I'm lucky to have those opportunities.”  If this is fun think about being on Spaceship 2.)  
    Old Fords - GT 40, AC Cobra

    Once the first successful coast to coast flight occurs, we can expect some interest in full size passenger space ship development for the major airline companies.  The launch vehicle/spaceship design eliminates the noise problems of the Concorde so development should be straightforward.   The issue will be the economies of suborbital transportation once the “tourism” bonus is exhausted.  The G-forces involved may make the market too small for a company like Boeing to be interested but current business jet manufacturers may try to enter the suborbital market.

    Disclosure: None for this Post
    Jan 06 5:47 PM | Link | Comment!
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