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  • Intel: My Take On The Earnings Report [View article]
    Good point, Seppo.
    Apr 17 11:46 AM | Likes Like |Link to Comment
  • Micron Technology: Worth Between $29-33 Per Share, Strong Buy On Market Correction [View article]
    Thanks, Vet. Your comments are quite valuable. Keep 'em coming. Better yet, write an article.
    Apr 17 11:37 AM | Likes Like |Link to Comment
  • Intel Tablet Contra Revenue Will Cost About 3.5 Cents Per Share In Q2 [View article]
    Thanks, Jeff. Good job.
    Apr 17 11:32 AM | Likes Like |Link to Comment
  • Micron Appears To Be A Good Investment At This Point In Time [View article]

    Apr 17 12:27 AM | Likes Like |Link to Comment
  • Micron Technology: Convertible Disaster [View article]

    That sure is a vivid imagination at work. :-)

    I would think that some disclosure would have been made in the Micron 10-K if a buyer was also a joint venture partner.
    Apr 15 01:32 PM | 1 Like Like |Link to Comment
  • Micron Technology: Convertible Disaster [View article]
    amosesjr, Phred.

    >>He says there that large holders with sophisticated brokers merely deposit the bond as security on the short, so there would be no borrowing.<<

    Actually, you do need to borrow shares to short but you do not need to secure your obligation to return those shares with margin since the bond that you put up secures your obligation to return those shares perfectly since it is convertible into them. That sentence was too long. Let's try this:

    1. You buy a $1000 convertible bond. It pays 4% interest and is convertible into 10 shares of stock.
    2. You borrow ten shares of stock. You promise to return those ten shares of stock and put up your convertible bond as a guaranty for that promise. This works perfectly since the person who loaned you the shares can always convert the bond and return the shares to himself.
    3. You sell the borrowed shares at $115. You collect $115,000 from that sales. This locks in that $15 profit since, on the bond's maturity, after you have collected the interest all that time, you convert the bond into ten shares and return the ten shares you borrowed.
    4. You wind up with $115,000 plus your interest until you converted.

    I hope that this will make more sense out of a very complicated set of arbitrage transactions.

    Also, it's a little over-simplified for illustration purposes. Nothing is quite so perfect in the real world.
    Apr 15 01:27 PM | 1 Like Like |Link to Comment
  • Micron Technology: Convertible Disaster [View article]
    Great job, Phred.

    I have two comments

    I don't blame Ron Foster for the problem the way that you do.

    First, every director had to participate in the decision to issue the convertibles and vote on approving the transaction. I find it hard to believe that the directors all need to go back to school and take a course in analyzing a transaction from a cost/benefit perspective. It is possible, however, that no one on the board is paying attention. If so, we should put one of our own on that board next shareholder meeting to mind the store.
    More likely, though, the reward was perceived at that time as being so great from the use of the cash raised by issuing the convertibles that the estimated cost was thought to be worth it.
    Secondly, hindsight is 20-20. Perhaps no one thought the cost would be so high. Perhaps no director contemplated Micron's stock being over $20 a share; no one thought the yen would do what it did; that the mobile parcel and server markets would do what they did, etc.

    My second comment is that I don't think defeasance is possible or even relevant.

    In real estate, when one substitutes collateral for the security afforded by the lien on a parcel of real estate, the amount of the debt being secured is known precisely - it's the amount of the mortgage. So one can perfectly secure the mortgage holder with treasury bonds and there is no possibility that the mortgage holder won't get the same payments as it would have with the realty as security.

    In the case of these convertible debentures, the right to covert is not security for the repayment of the debt; it's a potential bonus. And the amount which that bonus is worth cannot be precisely determined. It changes with the price of the stock. So you cannot perfectly secure it with a substitute collateral since you do not know how much it will turn out to be.

    But those are just quibbles. I agree with your analysis and your conclusions.
    Apr 14 11:44 AM | 7 Likes Like |Link to Comment
  • Micron/Alcoa Earnings Redux: Both Companies Seeing Positive EPS Revisions [View article]

    >>Ok, Doggie, be sure and bet the farm on that $3.50<<

    No need to. $3.00 will do fine. Even $2.50 works for a $25 stock. The downside is so limited in this stock that the risk/reward ratio is skewed. Very little risk and lots of potential reward.

    I'd call is a <10% probability that the stock is lower than $25 by April 4, 2015 with the other 90% spread in a normal bell curve with a peak at $32 and 20% between $32 and $40.

    If you want to bet a farm, I don't know of a better place to do it. But always keep a farm or two in reserve. You never know what might come along tomorrow.
    Apr 11 08:41 PM | 6 Likes Like |Link to Comment
  • Micron/Alcoa Earnings Redux: Both Companies Seeing Positive EPS Revisions [View article]
    Thanks Brian
    Good summary Of Key points.
    Apr 11 07:38 AM | 3 Likes Like |Link to Comment
  • Intel: Are You In For The Run Up? [View article]
    Apr 10 01:42 PM | 2 Likes Like |Link to Comment
  • Micron Earnings: The Next Day [View article]

    I'd look at the agreement with the Elpida creditors and tell you the answer -- but it's in Japanese. Worse, It's Japanese legalese.

    But I'll venture an educated guess.

    Highly unlikely. Elpida's earnings are the only source of funds the Elpida creditors can get paid from and the agreement will require that those funds
    be kept ultra safe and in Japan.
    Apr 8 02:47 PM | 3 Likes Like |Link to Comment
  • Micron: Updates Following Q2 Earnings [View article]
    Thank you, Phred.

    I was like 305. 305! I've never seen 300+ before.
    Apr 8 11:40 AM | 2 Likes Like |Link to Comment
  • Micron, Intel, Apple: A Tale Of 3 Companies [View article]

    Sorry it took so long for me to answer. I'm traveling.

    >>do you think they had a disclosure obligation on March 13th?<<

    If the consequences of the German court's ruling would not be material if enforced, as management says, then there was no obligation to disclose.

    However "material" is a very squishy word in securities law cases. Essentially, it means that which would make a difference to a hypothetical "reasonable" man. The problem with this is that "reasonable" is just as squishy. You're reasonable. I'm reasonable. Yet we've disagreed several times.

    If I were advising them, I'd advise them to disclose it. You never know just how "reasonable" the trial judge is going to be and appeals are expensive.
    Apr 7 12:24 PM | 5 Likes Like |Link to Comment
  • Micron Earnings: The Next Day [View article]

    >>know some of you have tried to explain how the short interest is largely tied to these convertibles, but I don't yet understand the details of how it works. I am a details guy and I like to understand how all the dots connect.<<

    I'm a details guy too. Let me try it by using an example.

    For simplicity, let's say that you own a $1000 10-year convertible bond paying 4% interest. Let's say that bond is convertible, at any time at your choice, into ten shares of ABC stock. If you convert the bond, you give up the $1000 it will pay back at maturity, and you give up the 4% which it will pay you each year until that time. In place of the bond, which you turn in, you get 10 shares of ABC stock by converting.

    Let's say that you are sitting on the bond and ABC stock goes to $115 a share. You can get $1150 for that $1000 bond if you convert and can sell the stock quickly enough, before the price moves. That's a good profit. You'd like to do that but you're greedy (like me) and you'd rather get your 4% interest until the last minute and then convert, getting both the interest on the bond and the extra $150 for the premium built into the current stock price.

    No problem. Just short 10 shares of the stock at the current price, $115 per share. Now you are perfectly hedged.

    1. If on maturity, the stock goes down to $100 a share, you still get your 4% to maturity plus $1000 AND you cover your short capturing the $15 a share profit.

    2. If the stock goes down more than that, you make more on your short by covering it AND you still get your 4% and $1000 on maturity.

    3. If the stock goes up, you can lose money at the rate of $10 for each $1 per share up in the short position but value $10 for each $1 up in share value since the bond is convertible into ten shares of stock.

    Voila. You have locked in the $15 per share gain and still get your interest and principal on the bond for as long as you choose to hold it.

    This is called a perfect arbitrage. One thing about a perfect arbitrage. You do not need to secure your borrow of the shares you sold short with money which you borrow from the broker and pay interest on. You secure your obligation to redeliver the borrowed shares with the bond which can be converted, at any time, into those shares. So no need to borrow anything on margin and pay interest on it. You put up the bond instead. You do need a somewhat sophisticated broker for this.

    I hope this helps. If I've gotten something wrong, or forgotten something, please let me know and I'll try to fix it in a post.
    Apr 7 12:14 PM | 12 Likes Like |Link to Comment
  • Micron Earnings: The Next Day [View article]

    >>I see no solutions; no way out.<<

    Aspirins are cheap.
    Apr 7 11:36 AM | 4 Likes Like |Link to Comment