The Unsustainable Lie of Inflation

Tue, 10 Nov 2009 07:18:56 -0500

unemployment in Zimbabwe is reckoned to be at 90%, but this has not prevented hyper inflation.

On Nov > Weimer Republic.
>
> Prices doubling every few weeks and days, sometimes by the hours.
>
>
> No matter how much "money" the FED prints, true "hyperinflation"
> will not occur in the US unless the unemployment figures return to
> the 4-5% range.
>
> People who are not working and subsist only on the fixed income of
> unemployment or SS or pensions are the great weight holding down
> any "hyperinflation."
>
> The TBTF banks are hoarding this new "money" from the FED which leaves
> little velocity to ignite serious inflation, let alone hyperinflation.
>
>
> The TBTF banks, and many smaller community banks as well, have giant
> black holes on their balance sheets that must be filled with all
> this money being printed by the FED.
>
> Only if those balance sheet black holes are filled up would the velocity
> of money rise to maybe create hyperinflation.
>
> If real hyperinflation was to ever take hold, it would not last long
> in the US as society would collapse and there would be a rebirth
> of a new nation.
>
> Shakespeare predicted it would start by killing all the lawyers.
> If hyperinflation comes to pass, bankers and politicians will be
> the first to face the anger of the masses.

Book Review: The Greatest Trade Ever, By Gregory Zuckerman

Tue, 10 Nov 2009 07:00:36 -0500

I think the guy in Texas was J Kyle Bass. I recall a documentary featuring the in depth research he did - interviewing people at various stages in the subprime/MBS value chain and coming to the conclusion that his early concerns about the absence of risks for mortgage sellers (and bank repackagers) or credit checks were all too well founded. Fascinating stuff. Borrowers got played by the initial 'lenders', and the skewed system.

On Nov

Short Amazon: Risky Investment at Current Price

Tue, 27 Oct 2009 06:24:54 -0400

interesting perspective, and I somewhat share your skepticism about the sustainability of Amazon's current share price. conceptually though, there are some factors to consider which I don't think you've adequately addressed:

1. e-commerce market size is growing, and will continue to grow - hence it's not a zero sum game for leading ecommerce players - so if Amazon grows with the ecomm market, they could still grow earnings nicely
2. share of ecommerce wallet - Amazon is again well positioned to benefit disproportionately from their superior proven ability to execute and delight customers - launching new categories, and growing strongly in non $ denominated countries (e.g. € zone, Yen) which provides a strong lift to dollar denominated earnings, and taking more than ecomm market growth rate in overall share
3. leverage - Amazon and Walmart will be the players most likely to be able to leverage their scale to really crank the revenue handle - and generate strong bottom line growth, even on compressed margins.
4. International growth - see above - the weaker the dollar gets, the more international sales in stronger currencies boost earnings
5. Innovation - Amazon is pushing into some interesting areas (cloud, payments) which could further boost their reach and customer base. 'Owning' the consumer's transaction info - that crucial billing relationship, really aligns with the audience growth objectives of the core business.
6. Strong management - there are some very good long serving executives at Amazon who know the game very well, and this stability allows the company to continue their track record of above average execution.

So, I'm not joining your short trade just yet (there's a good chance of getting run over by the sentiment train right now), but I may do so once the post earnings party euphoria starts to fade.

Android, iPhone Ride Rising Tide

Mon, 05 Oct 2009 06:45:37 -0400

was about to comment on that 600 a month! thanks for taking care of it. always worth a re-read before publishing an article, particularly things like ARPU figures...

On Oct > want to permanently increase their phone bills $ 600 a month"
>
>
> Strangely, noone so far has commented upon your math. Presumably,
> above, you meant year, but even the, you are implying that data plans
> are $> this amount" class="currency_conver... to $> title="Convert this amount" class="currency_conver...
> a month.
>
> I have an iPhone > class="currency_conver... a month. Why? I live in
> an EDGE area, with
Does anyone know of any good studies on the effect on equity valuation of massive aggregated fund pools which our pension and investment fund create? Seems to me there's a constant upward pressure on multiples from more and more capital chasing equity exposure/upside. Wondering if it's leading to a somewhat permanent shift to equities becoming too expensive on a risk adjusted basis?

On Sep 30 08:33 AM JG Savoldi wrote:

> Our model says that we're about to get the answer to the question
> very soon. We're expecting a 22% crash into October 13th as the
> SPX kicks-off a larger degree decline toward 529 later this
> year/early 2010.
>
> The BAM Model is not based on Elliott Wave Theory, but I'm also seeing
> a potential structure that would fit very nicely with our forecast.
>
>
> I'll elaborate more on this thought on our blog later this week and
> post a few charts etc. but if you look at the SPX 11-21-08 low as
> a point of origin, and observe the > class="currency_conver... Fibonacci relationship
> between what could be interpreted as an A.B,C structure into the
> recent highs, that potential large 4th wave expanding triangle pattern
> would project down to SPX >
> My interest in this pattern is that my model is calling for a 50%
> crash over the next 2-5 months (target > this amount" class="currency_conver... before a
> further collapse into 2012-2014.
>
> That would fit very, very nicely with this idea of a large degree
> Elliott wave expanding triangle 4th.
>
> Regardless of structure, we're short here and expecting the crash
> to start accelerating to the downside later today as we enter the
> first of three crash zones contained in October.
>
> 9/30--10/2
>
> 10/13--10/14
>
> Follow us on Twitter for the rest of the details!
>
> bit.ly/l3hv8

While eBay Burned, Whitman Fiddled

Thu, 01 Oct 2009 04:17:37 -0400

really like your work - keep it up. the entitlement culture among the top execs at companies like Yahoo and eBay is nauseating. i know it's just human nature (aka greed), but its amazing that performance related compensation turned into: stock plummets, compensation rockets.

Dell / Perot: Insider Trading in M&A Is Alive and Well

Tue, 22 Sep 2009 07:23:55 -0400

why not fine all the perps 10-50x the profit they made. might help reduce the deficit a little...prison time costs us money, but if they have to pay instead...

Why Argentina's Talking Again

Tue, 22 Sep 2009 06:49:58 -0400

not really a relevant comment to the article, but a nice way to market your views and services.

On Sep 21 11:31 PM Mad Hedge Fund Trader wrote:

> itx A number of readers have asked me to come up with a safe, high
> yielding investment in which to hide out in case the equity markets
> swoon again. That means they are looking for a security that offers
> a high fixed return, denominated in a strong currency that will benefit
> from future upgrades that will boost the principal over time. All
> of that is another name for the Invesco PowerShares Emerging Market
> Sovereign Debt ETF (seekingalpha.com/symbo...). The fund
> has 40% of its assets in bonds issued in Latin America and 31% in
> Asia, with the bulk of the maturities exceeding ten years. The two
> year old fund now boasts $ 340 million in market cap and pays
> a handy 6.42% dividend. This beats the daylights out of the nine
> basis points you currently earn for cash, the 3.40% yield on 10 year
> Treasuries, and still exceeds the 6.42% dividend on the iShares Investment
> Grade Bond ETN (seekingalpha.com/symbo...), which buys predominantly
> single “A” US corporates. The big difference here is that foreign
> bonds are issued in strong foreign currencies instead of weak dollars,
> and have a rosy future of further credit upgrades to look forward
> to. It turns out that many emerging markets have little or no debt
> because until recently, investors thought their credit quality was
> too poor. No doubt a history of defaults in Brazil and Argentina
> in the seventies and eighties is at the back of their minds. With
> US government bond issuance going through the roof, the shoe is now
> on the other foot. A price appreciation of 125% over the past year
> tells you this is not exactly an undiscovered concept. Still, it
> is something to keep on your “buy on dips” list.

Is the Time Right for Nokia?

Mon, 21 Sep 2009 03:34:38 -0400

Sweating bullets won't cut it. No SVP or EVP fires themself, or admits the true extent of the gap between their skills and what a company needs to reinvent itself. Self deception and poised speeches skating over the evidence is far more comforting. Gerstner was an outsider...

Nokia's trend loss in high end is horrific, and they seem to be always 2-3 years too late in responding to market trends (remember the flip phone debacle...).

Thanks Keith for an interesting and thought provoking article.

On Sep 20 05:51 PM davidrdesign wrote:

> You had me all the way until this: "Nokia’s present strategy of multiple
> handset products looks flawed and dated. The key today is applications
> and services not hardware design. Developers want fewer platforms
> and I suspect so do customers. Nokia's management and the essential
> components of its strategy has barely changed over the last decade.
> It is time for a change."
>
> The inference here is that Nokia doesn't know this or is ignoring
> it. There aren't. They're just too big to make it happen fast enough.
> But I know they know. They're working on it and sweating bullets
> about it.

Buying Apple Today: Like Buying Microsoft in 1998?

Fri, 11 Sep 2009 09:57:09 -0400

"Apple has 100 million credit card-registered iTunes users who have access to one-touch purchasing. This will swell, conservatively, by 4-6 million customer per quarter as iPhone and iPod touch devices require syncing and loading. No company on earth will have what Apple has within 2 years, and that's key to the software portion of the business."

Just to add a detail to this good point. In the mobile value chain, so called 'operator billing' - where the consumer pays for items via their monthly operator/carrier phone bill - adds a massive cost to the transaction flow, which makes the proposition less appealing to content providers and application store owners. So App Store could easily be not just the largest application store in the world, but the most efficient/profitable since it reduces the excess profit grab of the operators for their billing services.

On Sep 11 06:34 AM Timeline Strategy Consulting wrote:

> I think you're wrong, and here's why.
>
> In 1998, Microsoft had established a massively dominant operating
> system and business suite (Office) business, as well as leading market
> shares in database, server, and other enterprise. There was little
> that it did in which it did not lead. Thus, its growth outlook was
> capped. It's ironic that Microsoft's current dominance in operating
> systems (93.06% for Microsoft vs. 4.87% for Mac via one measurement)
> is often used as the defense of investing in MSFT or against investing
> in AAPL. Such dominance is more risk than opportunity, for the company
> and for the shareholder.
>
> Contrasted, there is no space in which Apple competes, other than
> music players (which have now declined to 18% of its revenue) where
> it holds more that 10% market share. Not desktop or laptop computers,
> and despite the success of iPhone, not mobile handsets.
>
> Here's an open question for you. How can you financially value a
> business that is:
>
> > this amount" class="currency_conver... per unit,
> or $> class="currency_conver... earnings in 2010, which
> at a P/E of

The Case for Moving iTunes to the Cloud

Wed, 09 Sep 2009 10:03:33 -0400

or everyone could buy expensive (though admittedly very nice looking) Apple time capsules...

Yahoo Insiders Should Be Shown the Door Out

Wed, 09 Sep 2009 09:47:48 -0400

Sounds like great investment advice: "get a senior role at Yahoo! and then kick back and get rich". Where do I apply.

Betting on the Big Banks

Wed, 22 Apr 2009 09:14:57 -0400

agree completely with your sentiments. it's a white knuckle ride in the big financials though, and the 'we changed the rules again' factor hardly helps. we're talking opportunist trades rather than line by line fundamentals analysis. I can't believe we won't crater again though given the rotten assets tucked out of sight - resi and commercial real estate need time to bottom and then stabilize. the relaxing of accounting rules and taxpayer intervention just slows this process. Still, i don't agree with those famous 'let em fail' guys either - too much 'innocent bystander' damage despite the costs of the bailout.

Why I Think Paul Krugman Is Wrong

Tue, 24 Mar 2009 06:52:26 -0400

fair comment about Goldman's political connections and influential alumni. still, Goldman made a couple billion shorting sub prime and associated businesses (homebuilders), and kept their balance sheet cleaner vis a vis troubled assets. their prop desk helped keep them afloat while others were sunk by the concrete footwear of very crappy (trip A but not really...) assets

On Mar 23 08:31 PM User 357469 wrote:

> I guess Goldman Sachs put more money in the pockets of the right
> politicians.
>
> On Mar 23 08:11 PM 367851 wrote:

Why I Think Paul Krugman Is Wrong

Tue, 24 Mar 2009 06:48:15 -0400

dcb: nice!

Housing Price Decline: You Ain't Seen Nothing Yet

Fri, 06 Feb 2009 09:23:15 -0500

Excellent and thought provoking article. As someone who lived in NYC for 10 years, it always blew my mind how real estate prices were just going crazy, driven by speculation (just like London where I also lived for years). I frankly hope the speculators and greedy few lose their shirts on the resi and commercial real estate plays they made.

I hate to waste time responding to John1, but think about this:
"It is because I love America that I criticize the crooks, charlatans and morality free sleazebags (and I don't just mean Republicans, though the previous administration was disgusting by any measure). We all have friends who have been injured or killed fighting abroad. Intervening in the always volatile Arab world has not brought us more freedom, safety or sunny future. Our leaders have an obligation to the soldiers risking their lives to ensure their mission is clear, rationale, and includes an exit strategy. They, and their regulators, also have an obligation to protect investors, homeowners, and decent working people, from the excesses or corporate greed. They have failed us and criticizing, and learning from, their failures, is a very American, and patriotic, thing to do.

Dennis Gartman on Gold, Oil, Government and the Economy

Tue, 27 Jan 2009 08:26:21 -0500

interesting reading. while I don't buy some of the stuff (nuclear power our saviour, peak oil a nonsense), I'd back him vs. Mr. "if you own gold, its time to fold" on the forecast that gold will likely appreciate decently this year. In the few weeks since that now infamous "time to fold" article, gold has jumped from 725 to 903. Also agree that physical gold is a big expense to pay for the (hopefully) low % risk of really bad scenarios vs ETF.

The Bull Run Begins This Week

Wed, 21 Jan 2009 07:18:47 -0500

wish that it were so. you should have clarified what kind of bull run you meant...maybe a BS run...?

The Bull Run Begins This Week

Tue, 20 Jan 2009 07:25:09 -0500

I believe the bulls run in Pamplona

On Jan 18 02:35 PM CautiousInvestor wrote:

> I make a habit of being as respectful as possible on this board and
> others but this article taxes my restraint.
>
> And while there may be an Obama bounce, though that is not certain
> as many earnings will be released next week, the structural aspects
> of this decline are worsening as they surface.
>
> Declining estimates of economic growth, rising foreclosures, collapsing
> industrial production, growing estimates of what is needed in the
> stimulus package, rising estimates of banking sector losses and growing
> unemployment are simply the first things that come to mind.
>
> If we face deflation and the corrective actions are not equal to
> the task, we are some ways off from the streets of Barcelona where
> the bulls run.

Can You See Apple Under $60?

Thu, 15 Jan 2009 07:09:30 -0500

Reagan, fair comment about my Apple baiting motivations (at least in part). I apologize for my slide into partiality, and giving in to the urge to tease the fan club.

I guess I've been so (profitably) bearish since October that its effected my overall sentiment about the market's appetites for stocks, even good ones, and I see 09 in general being a grizzly year. Still, maybe 40 was just a shade too far, even for a nightmare market. But I think the stock has persistent downside risk from 85, especially until the extent and duration of the US consumer recessions becomes clear. Frankly I'd be happy to see Apple irrationally back at $200, since it would mean the economy would be back on track. Until then its volatility city, only for the day traders and foolhardy.

Apple Will Be Fine!

Thu, 15 Jan 2009 05:06:32 -0500

I've said in the past that Apple's stock was due for a fall (when it was at 95), and that its had its best days (and received a few thumb's down 'votes' from the usual Apple sheep!) I posted a pretty depressing prediction that the stock could touch 60 bucks this year. Apple will be a good company for years to come, even without Jobs, who is a unique and talented character. Would I buy the stock at 60? Perhaps. But the days of $203 are over. Look elsewhere for 'insanely great' growth.

Want to Reform Wall St.? Bring Back Partnership Investment Banks

Mon, 12 Jan 2009 06:23:08 -0500

I agree. The asymmetric returns issue was critical what's happened in the last 18 months. Also, let's not pretend what happened was unforeseen. Many people made a ton of money shorting the banks, the real estate players and the home builders. Goldman dumped partnership in favor of cheaper and more efficient capital raising. Also, to compete, all banks had to take more and more risk, and lever up increasingly to generate the right deal and return profile. The US government and financial regulators have been deemed to be asleep at the wheel here, but they were wide awake - just too close to the money and their buddies at the I banks.

Can You See Apple Under $60?

Fri, 21 Nov 2008 08:02:51 -0500

Apple is a decent company with some good products. Still, it´s been overvalued for some time - the user/fan/Jobs premium is alive and well. Expected dividend payments from the stock in the next 5 years? $0. Mmm, nice. The market was full of amateurs (and some pros too) just imagining the logic free valuation of Apple would take it through $200 and beyond. This Bear has teeth, that's for sure, but the problem was with Apple's pumped valuation. Now the cheap money steroids have been confiscated, it could easily drift down to the low 50s. Still, it could hit 100 again in a few years (2-3). In the meantime, a lot of fairly inexperienced investors (and hey, I've taken a bath on some finance stocks too) will become seasoned investors - hard lessons though. Apple could hit $40 a at trough, and I'd say its a reasonable buy there.

Google Keeps Thriving Despite Tough Environment

Fri, 21 Nov 2008 03:35:53 -0500

Google is indeed a solid company, with a good and defensible value proposition. When the stock drops below $250, I might well take a meaningful long position. I can imagine that doubling, but more likely over a 5 year time line.

Let GM Fail

Thu, 20 Nov 2008 05:24:26 -0500

Fire the managment (with no payoff), make the cuts needed to keep the best of the business going, and give the workers a share in the risk and reward of working for GM (stock options or other recovery based incentives, in exchange for lower salary benefit packages). If GM goes, plenty more jobs outside GM will go, resulting on more broken families and crushed lives. I know Wall Street types like to quote the 'creative destruction' mantra, but always remember that there are plenty of real families out there who don't care about economic theory - they just want a chance to live and buy stuff - and we should work hard to ensure they get the chance to do so.

General Electric: Genuine Risk of Collapse?

Thu, 20 Nov 2008 05:04:46 -0500

I think its time for Immelt to go, forgoing any final payment. He can keep the $72 million in compensation for his CEO tenture. Maybe he should go teach at HBS, donating his stipend to Americans made homeless by the sub prime disaster.

What Are Some of the Best Hedge Fund Managers Doing?

Wed, 19 Nov 2008 06:41:08 -0500

very interesting. thanks for the reporting and insights.

Research in Motion: Vulnerable to a Takeover Bid?

Fri, 24 Oct 2008 09:05:52 -0400

As predicted, RIMM continues to tank, tracking the market and then some. If I were unfortunate enough to be long RIMM right now, I'd be concerned about the giant bites Apple is taking out of the high end consumer market. The battle gets interesting. Still I've been successfully bearish on both RIMM and Apple since they were 3x and 2x their current price, and the feel bad continues. Given its a Friday, and the markets are looking sea sick, why not switch off that Berry and go for a long (and cheap) lunch with some old friends. When RIMM hits high 30s and Apple low 80s, I'd take a bite (and pardon the pun), but not too large a % position in either - its a long dark road until the bounce.

southbeach's Comments

The Unsustainable Lie of Inflation

Book Review: The Greatest Trade Ever, By Gregory Zuckerman

Short Amazon: Risky Investment at Current Price

Android, iPhone Ride Rising Tide

While eBay Burned, Whitman Fiddled

Dell / Perot: Insider Trading in M&A Is Alive and Well

Why Argentina's Talking Again

Is the Time Right for Nokia?

Buying Apple Today: Like Buying Microsoft in 1998?

The Case for Moving iTunes to the Cloud

Yahoo Insiders Should Be Shown the Door Out

Betting on the Big Banks

Why I Think Paul Krugman Is Wrong

Why I Think Paul Krugman Is Wrong

Housing Price Decline: You Ain't Seen Nothing Yet

Dennis Gartman on Gold, Oil, Government and the Economy

The Bull Run Begins This Week

The Bull Run Begins This Week

Can You See Apple Under $60?

Apple Will Be Fine!

Want to Reform Wall St.? Bring Back Partnership Investment Banks

Can You See Apple Under $60?

Google Keeps Thriving Despite Tough Environment

Let GM Fail

General Electric: Genuine Risk of Collapse?

What Are Some of the Best Hedge Fund Managers Doing?

Research in Motion: Vulnerable to a Takeover Bid?