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Squeeky Wheel's  Instablog

Squeeky Wheel
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I am a devotee of technology, data and education. I seek deep understanding in everything I do. I have studied sciences, computing, and quants. I apply a voracious appetite for knowledge to both my professional and financial life.
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  • How Lack Of Inflation Can Hurt The Economy

    This is going to be a micro-economic argument based on the behavior of a food outlets near my home.

    The example is a restaurant named Por Kee (Singaporeans will know the place*). Por Kee is a small Chinese restaurant with an excellent reputation. They are nearly always full and have a line at dinner time. They have room to add more tables... but they don't. They don't add more tables because they can't hire more service staff. But why not? Surely they could put out some more flyers for staff and raise wages if needed. They could surely steal away one more staff from the area if they paid enough. But they don't.

    Here is where the inflation comes in. The restaurant could raise wages, hire more, increase revenues and maintain profits... if they raise prices a little. Could they raise prices a little? I think they could (there is a line for dinner after all). But what if management believes they can't - even if wrongly. Management is deciding that customers won't stand for inflation. Management ensures lack of inflation by not raising prices (sort of the definition of no-inflation). Management also ensures: 1) fewer meals served and hence less output - lower economy than we could have - and 2) less employment and at lower wages than we could have. The second also means all the other stores in the area have fewer and less wealthy customers.

    Merely the *belief* that customers can't accept inflation is self-fulfilling and produces a smaller economy.

    *I recommend the yam paste dessert.

    Tags: Macro, Inflation
    Jul 13 11:30 PM | Link | Comment!
  • Quick Thoughts On Various Companies

    Here is the super quick summary of a number of companies I hold or am considering. Disagreements especially welcome!

    Tower Group (NASDAQ:TWGP)

    • Poor performance can no longer kill the deal
    • Funding in place
    • If the deal fails for any reason, the company is toast (butter down)
    • The September debt payment needs the deal to complete, yet the deal has until November.

    Trip Advisor (NASDAQ:TRIP)

    • Reviews are exceptionally valuable when going someplace new - i.e. for travels
    • The new flight and hotel search is excellent for users
    • There is a clear move towards "build my trip", which could allow for creating highly customized guidebooks and itineraries.
    • This is the market leader of the space

    Bank of Internet (NASDAQ:BOFI)

    • Internet only banking has great efficiencies
    • They have done a great job at keeping NPA low.
    • NIM is good.

    Walgreen (NYSE:WAG)

    • Consistent high execution
    • Boots is a built in growth plan and beach head into Europe

    Wells Fargo (NYSE:WFC)

    • Traditional banking is boring, and boring is usually profitable.

    Washington (NASDAQ:WASH)

    • Regional boring banking. 100+ years of dividends
    • Interesting wealth management kicker
    • Rhode Island has not has as much 'recovery' as the rest of the country and might outperform in the next few years.

    Ship Finance League (NYSE:SFL)

    • The good bank of the empire.
    • Economic recovery and diversification are good for ship rates

    The Spinners: Seagate (NASDAQ:STX) and Western Digital (NASDAQ:WDC)

    • Storage space needs are increasing
    • Hybrid SSD / HDD is the obvious design choice - caching is used everywhere is computing - and they are best positioned to provide it.
    • STX looks cheaper than WDC, but stock returns have been slightly lower.
    • White label in cloud data centers is a risk

    Premier Exhibitions (NASDAQ:PRXI)

    • Finally fired the CEO.

    Japan (NYSEARCA:DXJ)

    • My favorite Japan economy commentator (Noah Smith) has pointed out that Abe is seriously committed to improving the Japanese economy.
    • Japan is probably more committed to economic reform than any other developed nation right now.

    Solar (NYSEARCA:TAN) and (NYSEARCA:KWT)

    • The price of solar compared to other options is dropping rapidly.
    • Price of solar is comparable to peaker coal/gas plants.
    • Environmental concerns will sooner or later raise the cost of coal closer to real cost
    • When solar hits the inflection point (near parity prices) the market will explode as old 'dirty' plants are not renewed
    • Over supply is an issue

    Charm Communications (NASDAQ:CHRM) -

    • yet another Chinese go-private.
    • Large, with no audit "issues"
    • Well funded deal; very likely to close
    Tags: TRIP, STX, WDC, PRXI, BOFI, TWGP, CHRM, WAG, WFC, WASH, DXJ, TAN, KWT
    Jun 24 3:29 AM | Link | Comment!
  • Lessons Learned IV - Selling Success

    Time for a success. In late 2012 I noticed that RRD was buying edgars.com which led me to look into RRD a bit. The overall story was pretty simple (all my very good investments have simple stories):

    • Print company suffering losses like most print companies
    • Print company unpopular with the Street because, well, print is boring and dying. BUT...
    • RRD was rapidly moving into digital media: huge high quality photo library and buying into digital publishing like edgars
    • RRD's historical financial print customer base would fit well with the move to digital services for financial reporting.

    IIRC, the price at the time I looked was 10 or 11. I waited for 9 and got it (by luck right at the bottom) in January. By August the price had doubled. At the time I thought more was possibly (and wrote an article to that effect). I was wrong, and the price slipped. Still, I held to my conviction - 6 months seemed too short for the market to fully reprice a turnaround. When prices returned to near 18 in November, I'd changed my mind - 18 was a good double, nothing had happened since August, further gains in the near term seemed unlikely. However, I was nearing a one year holding and wanted to both hold out and protect the gains. So I sold calls - I would be willing to put in an order at that price and sell anyway, and might get to extend my holding. The calls went in the money (and by more than I was willing to roll up to). I sold out at 18 + premium. Prices peaked at 20 and then dribbled down to 16 now.

    • The buy price was so good that any sell was going to be a killer trade.
    • Successfully read an overshoot of a long term turnaround (even as a good long term turnaround, there's no way the trend is double in value in under a year)
    • Got some luck on the double bounce
    • Locking into a sell price in advance ensured I didn't ride down.
    • In theory another 10% was possible - perhaps a staggered exit would have been better.

    So I lost out the last 10%. But I'll take 100% a year any day.

    Tags: RRD
    Jun 19 2:37 AM | Link | Comment!
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