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Small Fry

 
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  • Why Are The Bulls Regaining Momentum? [View article]
    First, Russia is mostly in Asia.

    Second, as I said, never underestimate the will of people defending their home. I never implied that attacking Russia would be a cakewalk nor was I suggesting that we do something like that.

    Third, I said that an idiot with a loaded gun like Putin is a very dangerous thing. More dangerous than a rational person with a loaded gun.
    Aug 15 01:29 PM | Likes Like |Link to Comment
  • Why Are The Bulls Regaining Momentum? [View article]
    Crimea is East of Istanbul. I'm going to say, close enough to being in Asia.
    Aug 15 12:14 PM | Likes Like |Link to Comment
  • Highlights From FS Investment's Q2 2014 Results [View article]
    A little disappointed in the lack of NAV growth.

    I wouldn't ding them on the declining portfolio yield if it's truly just caused by higher quality assets. They probably need higher quality assets to allow them to increase leverage (as they are) in a prudent way.

    I also wouldn't ding them too much on the portion of the income coming from non-recurring fee income (Wells Fargo analyst dings too much for that). I see fee income as the hedge for yield compression. If excess supply is causing yields to compress, you make that up by originating some of that excess supply yourself and gaining fee income to makeup for the lost spread income.
    Aug 15 12:09 PM | 1 Like Like |Link to Comment
  • Why Are The Bulls Regaining Momentum? [View article]
    What do all the conflicts you listed have in common? They defy rule #1 of warfare. Never start a ground war in Asia/Middle East. This time Putin is on the wrong side of that rule.

    I agree with you -- never underestimate the will of people defending their home.
    Aug 15 11:52 AM | 1 Like Like |Link to Comment
  • Why Are The Bulls Regaining Momentum? [View article]
    You're completely mistaken about Putin. Listen to him speak and you'd never mistake him for some kind of expert in "strategery". He's just another idiot with a loaded gun (which, unfortunately, is a very dangerous situation).
    Aug 15 09:51 AM | 2 Likes Like |Link to Comment
  • High-Yield BDCs For Q3 2014: Part 3 [View article]
    A couple arguments against BDCL:

    * It is not marginable. You can create 2x leverage yourself by margining BDC common stock to buy additional BDC stock.

    * As Buzz points out, you don't get a ton of diversification from BDCL. You can buy the top 5-6 BDCs he recommends, margin it for leverage, and create a better version of BDCL for yourself.

    One other risk worth mentioning about BDCL (and margining for leverage). When interest rates go up, I imagine BDCL's expenses will increase and they'll have to cut the divvy (of course, same applies to margining). I don't know how BDCL is creating leverage but it doesn't matter if it's by borrowing or options or fancy tricks. Every way of creating leverage is impacted by rates.
    Aug 15 09:28 AM | Likes Like |Link to Comment
  • Rising Interest Rates And BDCs: Part 2 [View article]
    Lee, agree with everyone that it is a great question.

    I think the theory behind raising rates is that the Fed is going to wait until there is more risk to the financial stability of companies from not raising rates than from raising rates. That is, they're going to wait until spiraling wage inflation is a greater threat to company's solvency than higher rates would be. If we find ourselves in such a robust economy and tight labor market that wages are poised to climb significantly higher, companies will be in a good position to pass the cost of higher rates onto their end-customers.

    Bottom line is that the Fed is going to err on the side of inflation to avoid any risk of driving companies out of business from higher rates and plunging the economy back in recession.

    While it's not causation, historically, the economy has performed best (and default rates lowest) during periods when the Fed has been increasing rates (not because higher rates cause a better economy but because the Fed doesn't raise rates until the economy is on a self-sustaining path).
    Aug 8 11:53 AM | 1 Like Like |Link to Comment
  • Wall Street Breakfast: Sprint Drops T-Mobile Bid And Replaces CEO [View article]
    Companies are free to leave but that's not what a tax inversion is. A tax inversion is a way of *staying* in the US without paying US tax. Most people would define that as stealing but due to a loophole, it's legal.

    It's no different than a company wanting all the benefits of being located in (the "socialist republic") of midtown Manhattan but wanting to pay the taxes of being in Wyoming.
    Aug 6 09:05 AM | 5 Likes Like |Link to Comment
  • Gilead: A Much Bigger Story Than Just Sovaldi [View article]
    I appreciate that the author is addressing the pushback people have on this stock. Nice to know it's not a one-trick pony and has other drugs that should keep earnings growing.

    But, I keep coming back to the comparison with Apple. First off, there was a once in a lifetime opportunity to buy Apple after it fell over 30% from its peak while still leading its industry. If GILD fell 30%, I'd buy a ton in a heartbeat.

    Next, it's easy to understand why Apple is a successful innovator. They have/had a new way of looking at technology from the consumer point of view and were the first to own the space at the intersection of art/design and technology. They had a charismatic leader in Steve Jobs who built a unique culture that lasts to this day. What makes GILD different from every other biotech company out there? Why is GILD going to be better at developing products than anyone else?

    I guess part of the argument is that GILD *is* just like every other biotech and should trade at the industry forward multiple which is significantly higher than their forward multiple.
    Aug 5 11:51 PM | 3 Likes Like |Link to Comment
  • 3 Stocks To Buy If Sell-Off Continues [View article]
    I would be adding to QCOM here if I wasn't already way overweight. Sure, China is an issue but the stock has been hammered and this is the sort of situation where you can establish a long term holding in a company with one of the best proven track records for innovation. They have some of the best managerial and engineering talent of any large company in the world and they're positioned in an industry that will grow for quite some time to come.
    Aug 4 03:10 PM | Likes Like |Link to Comment
  • Who Will Be Swimming Naked When The Tide Goes Out? [View article]
    There's one statement in the article that I think is wrong. The Fed is not going to wind down their $4T balance sheet, if by "wind down" you mean sell assets. For the indefinite future, they're going to maintain the balance sheet by replacing any debt that matures. This will be true even once they start raising rates. I'm pretty sure the Fed has said exactly that.

    Longer-term, they're just going to allow their assets to mature. There will be no asset sales (unless, obviously, they want to shrink the monetary base to reign in an overheated economy. But, the economy is so far from reaching "overheated" as to be something that's barely conceivable. In fact, we may be in an era of permanent anemic growth).
    Aug 4 02:57 PM | 4 Likes Like |Link to Comment
  • 2 Contrarian Plays In Housing [View article]
    I like your industry call but think the better way is to buy the suppliers to the homebuilders. I like MWA (which also sells their water infrastructure to local governments who are in dire need of network repairs) and USG (Buffet owned stock; every house needs a lot of wallboard).
    Aug 4 02:30 PM | 2 Likes Like |Link to Comment
  • A Tough Market For The 'Risk On' Investor [View article]
    When people talk of "risk-on" there's actually two kinds of risks you can take on -- earnings risk and interest rate risk. Both earnings and rates are what determine asset prices (if you use the DCF model for valuation). Personally, I want to be positioned fairly evenly between those risks. For me, that means borrowing at low margin rates and investing in high yield assets with inflation protection like MLPs, BDCs, low leverage REITs, unrated preferred stock, and the occasional misunderstood high-yielder like FLY. All of those assets should be able to increase earnings (and dividends) in line with inflation (except for unrated preferred stock which has a fixed divvy but should yield 8-8.5%).
    Jul 31 01:42 PM | 1 Like Like |Link to Comment
  • In Beats Restructuring, Apple's Tim Cook Sends Subliminal Message To Pandora [View article]
    I'm long Apple and neutral on the Beats acquisition but trying to evaluate the acquisition based on the comps being made to price X sales is apple and oranges. Most of Beat's revenues are for headphones, making it "branded consumer product revenue" which is worth a much lower multiple than "streaming music revenue" or "internet of things revenue".

    At this point all you can do is trust Cook on the acquisition. We'll only know if it's worthwhile if Apple is able to leverage Beat's tiny music streaming service into something big and/or if they're able to leverage the headphones into a connected, wearable device.

    Personally, I think connected headphones makes a lot more sense than connected glasses (like Google's) that make you look like a tool. Bear in mind, most of the time people wear the headphones around their neck (not on their ears) which makes them unobtrusive.
    Jul 31 01:00 PM | 1 Like Like |Link to Comment
  • Gilead's Massive Undervaluation: A Pictorial Overview [View article]
    Which is what makes GILD so similar to AAPL. Investors are concerned about what the product innovation pipeline holds for tomorrow, not so much about the success of current products today. That said, while both stocks have had impressive runups, I'm looking into whether GILD trumps AAPL in which case I'll be swapping out some of my AAPL. That said, AAPL has a longer track record of innovation, hires some of the best talent out there, and has developed a culture where innovation is part of the org's DNA. Don't know as much about GILD.

    Would have liked to see this article compare GILD to AAPL instead of the other stocks used for comparison.
    Jul 30 12:00 PM | Likes Like |Link to Comment
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