Christopher Smith

Comparing Value-at-Risk to Crash-and-Burn

The problem is that saying you're measuring "risk" based on "normal market conditions" is circular reasoning. The major risk rears its head when multiple things go wrong simultaneously, and given the number of different things that can go wrong, it'll inevitably happen.

Those are precisely the times when LTCM or the CDO market rolls over and dies, and simply assuming those situations out of your model means that your model is inadequate for the specific job it's supposed to do.

Can Nortel Pull an AMD on Cisco? Enough To Make It Worth Another Look?

Perhaps. I've used and recommended Cisco products because they're reliable, full-featured, and (generally) easy to configure. However, they're also terribly expensive.

I think rather than Nortel, the dark-horse competitor is Vyatta, which is producing open-source router software that runs on commodity x86 hardware. I've used this type of routing before, and an old Pentium-90 with an ISA network card was able to keep up with a full-speed 10Mb connection.

Investing on the First Day of the Month

I wonder whether this effect is caused in part by automatic investing plans that buy on the first, boosting prices.

China: No, But This Time Really Is Different

@iThinkBig: I suspect that you're right about 20-year cycles, and I would go so far as to suggest that the regular appearance of significant changes on 20- (and 40- and 60-) year patterns is connected to generational patterns.

For example, my grandmother is unbelievably... I'll say "frugal"... because of her experiences in the Depression. Most of my parents' peers are boomers who like to live big whether they can afford it or not. And my generation is taking a long, hard look at this and realizing that something has to change... and now we'll undoubtedly start flailing as we change "something" whether we understand it or not.

Cisco and Competition

Nah, not Microsoft v. Corel--Cisco actually has the much better products in this case.

Even though I currently recommend Cisco products (and am long CSCO), I'm definitely keeping my eye on Vyatta.

Industries to Avoid, Industries to Buy

While the author's prescriptions are eyebrow-raising in themselves, it seems that they're based on some fundamental misunderstandings of what underlies the situations he sees.

For example, cities don't regulate or manage water for consumer protection; they do it because a water utility is one of the special cases (almost all in infrastructure) where competition is impractical.

Additionally, he begs the question on ExxonMobil profits. In fact, most of the recent upward trend in earnings has been due to increased consumption. Despite the author's ex cathedra assertion to the contrary, businesses can make more money without necessarily improving profit margins--by increasing the volume of sales. In fact, XOM's profit margin is below the average profit margin of most banks and (pre-collapse) investment firms, and it's about half that of pharmaceutical companies.

Finally, it seems that those who call for a "windfall" tax or the even more confounding "regulation of profit margins" seem to studiously ignore two major points: Not only is the big, bad corporation owned (directly or indirectly) by pretty much everybody with a retirement plan, but XOM also paid the highest income tax ever last quarter.

Red Hat Earnings: JBoss Taking Share From Oracle?

To be fair to Vaughn Nichols, there is a large community of FUDsters out there that keeps shouting that open source is anticapitalistic and is an unmitigated destroyer of value. Red Hat has, of course, been making a profit, but this quarter's results indicate that it's possible to do so on a consistent basis.