Chris B's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/242427/comments http://seekingalpha.com/article/158524-strategic-hotels-resorts-only-for-long-term-investors?source=feed#comment-657463 657463 Tue, 01 Sep 2009 20:21:21 -0400 http://seekingalpha.com/article/141907-why-isn-t-microsoft-s-strategy-working-anymore?source=feed#comment-538920 538920
A more valid comparison might be to an old-school land line telephone company like Qwest (Q) or Windstream, which will eventually be wound down as demand declines. Demand declines because of the emergence of new technologies that make the wire lines almost obsolete.


On Jun 08 12:40 PM dybydx wrote:

> i agree with the non-innovator opinion from the author. although
> as someone else pointed out, MSFT is being bought as a utility company,
> not a growth stock. its low P/E of 12.5 is inline with many utility
> companies. (where as intc at 20, csco 16.5 and goog 32)
>
> although on the bright side i am glad that capital is being put to
> companies that CAN innovate.]]> Tue, 09 Jun 2009 12:33:36 -0400
A more valid comparison might be to an old-school land line telephone company like Qwest (Q) or Windstream, which will eventually be wound down as demand declines. Demand declines because of the emergence of new technologies that make the wire lines almost obsolete.


On Jun 08 12:40 PM dybydx wrote:

> i agree with the non-innovator opinion from the author. although
> as someone else pointed out, MSFT is being bought as a utility company,
> not a growth stock. its low P/E of 12.5 is inline with many utility
> companies. (where as intc at 20, csco 16.5 and goog 32)
>
> although on the bright side i am glad that capital is being put to
> companies that CAN innovate.]]> http://seekingalpha.com/article/141907-why-isn-t-microsoft-s-strategy-working-anymore?source=feed#comment-538869 538869
1) Bureaucracy kills creativity-----

The technology industry = hypercompetitive innovation = creativity. A corporation the size of Microsoft simply has too many hierarchical layers, too many standard operating procedures and policies, too many forms to fill out, and too much management and bureaucracy to be a hotbed of creative construction and creative destruction. Every time a tech company gets this big, along comes a much smaller, more creative, faster, and more dynamic startup competitor who cleans their clock with a whole new paradigm of what technology can do. MSFT in 2009 is what IBM was in 1989 and what Yahoo! was in 1999 in that they are ignoring the emergence of a new competitive framework. While MSFT managers hold endless meetings to craft their new system for processing expense requests, somebody else is working on artificial intelligence, a more effective interface, or a superior file format.

If you wonder why Google offers on-site massage services, free meals, and 20% creative time to its employees, etc. this is why. Yet, I doubt that even these measures will be enough to maintain competitive advantage (see reason 2).

2) Tech encourages entrepreneurship----

Why did the founders of Google drop out of Stanford to start their own business rather than just graduating and getting a job at Yahoo? Because if you are a brilliant visionary, no company can offer you the rewards that starting your own company can offer. Had Yahoo! even realized what these kids were capable of, they might have been able to offer them a measly $2 million a year or so - and even that would cause a management uproar. In technology, there are few barriers to entry. You don't have to come up with millions of dollars in financing to build factories, etc. If you build a better mousetrap, or search engine, the world really does beat a path to your door. Why then should you sell your better mousetrap to another firm for a tiny fraction of what you could have made with your own business?

3) It's like selling canned air... stale air----

Alternatives to ALL Microsoft software is now available for free: Linux or Android for your OS, Open Office, Google Docs, Linux for your server, Linux apps like GIMP for graphics, Firefox for your browser, and the list goes on and on. This wouldn't be a problem if MSFT quality was so much higher than their free competitors that it justified a price. However, Windows chronic and inherent lack of security or stability means that is not the case. Similarly, MSFT's attempts to produce hardware like Apple have ended with low quality products like the Zune and Xbox. Everything they touch becomes low quality. Open source hobbyists working for free are somehow writing better and more secure code than the paid employees at MSFT. For an explanation of why, see (1) and (2).]]> Tue, 09 Jun 2009 12:10:25 -0400
1) Bureaucracy kills creativity-----

The technology industry = hypercompetitive innovation = creativity. A corporation the size of Microsoft simply has too many hierarchical layers, too many standard operating procedures and policies, too many forms to fill out, and too much management and bureaucracy to be a hotbed of creative construction and creative destruction. Every time a tech company gets this big, along comes a much smaller, more creative, faster, and more dynamic startup competitor who cleans their clock with a whole new paradigm of what technology can do. MSFT in 2009 is what IBM was in 1989 and what Yahoo! was in 1999 in that they are ignoring the emergence of a new competitive framework. While MSFT managers hold endless meetings to craft their new system for processing expense requests, somebody else is working on artificial intelligence, a more effective interface, or a superior file format.

If you wonder why Google offers on-site massage services, free meals, and 20% creative time to its employees, etc. this is why. Yet, I doubt that even these measures will be enough to maintain competitive advantage (see reason 2).

2) Tech encourages entrepreneurship----

Why did the founders of Google drop out of Stanford to start their own business rather than just graduating and getting a job at Yahoo? Because if you are a brilliant visionary, no company can offer you the rewards that starting your own company can offer. Had Yahoo! even realized what these kids were capable of, they might have been able to offer them a measly $2 million a year or so - and even that would cause a management uproar. In technology, there are few barriers to entry. You don't have to come up with millions of dollars in financing to build factories, etc. If you build a better mousetrap, or search engine, the world really does beat a path to your door. Why then should you sell your better mousetrap to another firm for a tiny fraction of what you could have made with your own business?

3) It's like selling canned air... stale air----

Alternatives to ALL Microsoft software is now available for free: Linux or Android for your OS, Open Office, Google Docs, Linux for your server, Linux apps like GIMP for graphics, Firefox for your browser, and the list goes on and on. This wouldn't be a problem if MSFT quality was so much higher than their free competitors that it justified a price. However, Windows chronic and inherent lack of security or stability means that is not the case. Similarly, MSFT's attempts to produce hardware like Apple have ended with low quality products like the Zune and Xbox. Everything they touch becomes low quality. Open source hobbyists working for free are somehow writing better and more secure code than the paid employees at MSFT. For an explanation of why, see (1) and (2).]]> http://seekingalpha.com/article/141297-backing-the-dollar?source=feed#comment-532030 532030 ----------------------...
Wars fought to obtain global supremacy are also a well-known "dollar trap" yet that has never dissuaded an empire from pursuing them. China has purchased, through hard labor, the economic rights to cripple the US economy, control the world's new reserve currency, and become the dominant empire on the planet without a shot being fired.

The Chinese people won't mind if their government's rumored dollar investments lose value as long as their personal hoards of yuan keep increasing in value (remember their 50% savings rate?).

Americans might complain about becoming the next France or UK, except with lower living standards, but on the bright side nobody had to die in a war just to arrive at the same point.]]> Thu, 04 Jun 2009 13:22:30 -0400 ----------------------...
Wars fought to obtain global supremacy are also a well-known "dollar trap" yet that has never dissuaded an empire from pursuing them. China has purchased, through hard labor, the economic rights to cripple the US economy, control the world's new reserve currency, and become the dominant empire on the planet without a shot being fired.

The Chinese people won't mind if their government's rumored dollar investments lose value as long as their personal hoards of yuan keep increasing in value (remember their 50% savings rate?).

Americans might complain about becoming the next France or UK, except with lower living standards, but on the bright side nobody had to die in a war just to arrive at the same point.]]> http://seekingalpha.com/article/141286-julian-robertson-bets-the-farm-on-inflation?source=feed#comment-532019 532019
Suffice to say, no market theme or perspective endures forever, and chasing heroes is a good way to go broke.]]> Thu, 04 Jun 2009 13:13:53 -0400
Suffice to say, no market theme or perspective endures forever, and chasing heroes is a good way to go broke.]]> http://seekingalpha.com/article/135362-how-can-we-de-risk-the-economy?source=feed#comment-490576 490576
Easy.

Reinstate the Glass-Steagal Act. Separate the banks that lend money to consumers and businesses from the banks that flip investments for a living. Then we'll never again have a credit crunch that is caused by the investment side of the bank losing money, therefore curtailing commercial lending. Commercial banks would be responsible for their own loans again, and the FDIC would just do their routine changeover if they were mismanaged. As for the investment banks, once they cannot threaten the availability of credit in our economy, they are not too big to fail. Note that this plan builds in protection to some extent, against financial monopolies or oligopolies.

The pre-1999 banking system also has a history of over 60 years of world-leading stability to its credit, which is a lot more convincing than any TV or internet pundit's opinion.]]> Tue, 05 May 2009 13:33:33 -0400
Easy.

Reinstate the Glass-Steagal Act. Separate the banks that lend money to consumers and businesses from the banks that flip investments for a living. Then we'll never again have a credit crunch that is caused by the investment side of the bank losing money, therefore curtailing commercial lending. Commercial banks would be responsible for their own loans again, and the FDIC would just do their routine changeover if they were mismanaged. As for the investment banks, once they cannot threaten the availability of credit in our economy, they are not too big to fail. Note that this plan builds in protection to some extent, against financial monopolies or oligopolies.

The pre-1999 banking system also has a history of over 60 years of world-leading stability to its credit, which is a lot more convincing than any TV or internet pundit's opinion.]]> http://seekingalpha.com/article/131582-greg-reid-geothermal-the-sleeping-giant?source=feed#comment-490358 490358
You're right. That's one reason I own LSB Industries (LXU). While everyone's attention is on centralized energy harvesting from large geothermal installations, the biggest economic gains are available from heating and cooling structures using the dirt around them instead of expensive gas and electricity.

The downside is that most home buyers are more still concerned about paint colors than how many tens of thousands of dollars they will spend heating and cooling the place. That's why code-minimum HVAC units and insulation prevail in new construction.

I'm betting that ignorance will change. If not, there's always LSB's chemical and fertilizer businesses to fall back on, plus their solid balance sheet and cash flow.


On Apr 23 03:57 PM bpickard wrote:

> Another aspect of 'geothermal' is available for residential construction
> today, and delivers a better ROI than any large plant. Systems that
> make use of the differential between the ground temperature and ambient
> temperature exist now, are proven, are reasonable in cost to build,
> have a positive ROI, and a cash-pay-back of much less than 5 years
> over a conventional heating system. In areas across the northern
> latitudes where differences in temperatures are higher (on average)
> these systems can make the difference in the avoidance of the construction
> of new power plants.]]> Tue, 05 May 2009 11:59:51 -0400
You're right. That's one reason I own LSB Industries (LXU). While everyone's attention is on centralized energy harvesting from large geothermal installations, the biggest economic gains are available from heating and cooling structures using the dirt around them instead of expensive gas and electricity.

The downside is that most home buyers are more still concerned about paint colors than how many tens of thousands of dollars they will spend heating and cooling the place. That's why code-minimum HVAC units and insulation prevail in new construction.

I'm betting that ignorance will change. If not, there's always LSB's chemical and fertilizer businesses to fall back on, plus their solid balance sheet and cash flow.


On Apr 23 03:57 PM bpickard wrote:

> Another aspect of 'geothermal' is available for residential construction
> today, and delivers a better ROI than any large plant. Systems that
> make use of the differential between the ground temperature and ambient
> temperature exist now, are proven, are reasonable in cost to build,
> have a positive ROI, and a cash-pay-back of much less than 5 years
> over a conventional heating system. In areas across the northern
> latitudes where differences in temperatures are higher (on average)
> these systems can make the difference in the avoidance of the construction
> of new power plants.]]> http://seekingalpha.com/article/131582-greg-reid-geothermal-the-sleeping-giant?source=feed#comment-490337 490337 ----------------------...

This quote gets to the essence of it. Geothermal is expensive to build, but once built you don't have to buy a bunch of expensive fossil fuels for the next 50 years to run it. How much do you think those daily train loads of coal cost to purchase - each?

It's sort of an investor's dilemma: pay high upfront costs to yield higher returns over time, or pay low upfront costs and high daily costs to achieve a low return. Most conventional energy investments tend towards the later - especially since rising fossil fuel prices can generally be passed on to customers rather than crimping margins.

However, if a large base of wind/solar/geothermal energy is installed, it will become harder for the fossil fuel generators to pass on the risings costs of their fuels. That's when things get interesting.]]> Tue, 05 May 2009 11:52:08 -0400 ----------------------...

This quote gets to the essence of it. Geothermal is expensive to build, but once built you don't have to buy a bunch of expensive fossil fuels for the next 50 years to run it. How much do you think those daily train loads of coal cost to purchase - each?

It's sort of an investor's dilemma: pay high upfront costs to yield higher returns over time, or pay low upfront costs and high daily costs to achieve a low return. Most conventional energy investments tend towards the later - especially since rising fossil fuel prices can generally be passed on to customers rather than crimping margins.

However, if a large base of wind/solar/geothermal energy is installed, it will become harder for the fossil fuel generators to pass on the risings costs of their fuels. That's when things get interesting.]]> http://seekingalpha.com/news/market_currents/post/22933?source=feed#comment-482402 482402 Wed, 29 Apr 2009 09:29:32 -0400 http://seekingalpha.com/article/133243-the-obama-effect-is-clean-energy-outperforming-the-market?source=feed#comment-479749 479749
The source of Alpha is often the winning of a contract, and unpredictable technological breakthrough, or the best marketing mix in the sector. Those of us who do not work full time as sector analysts would be hard pressed to identify the best of class. Then, even if we did pick the best companies in each sector, our investments would have still lost half their value in the past 1.5 years due to the bursting bubbles and resulting credit crunch.

Why not seek positive Beta then? In hindsight, the one thing that could have saved us from the 2008-09 bear market would have been awareness that the housing and commodities bubbles were about to collapse. The warning signs were all there - skyrocketing prices, euphoria, the entrance of ameteurs in real estate and futures trading. Trend watching Beta seekers should have done better than Alpha seekers, presuming they weren't afraid to sit in cash for a year or so and weren't romanced by individual companies.

We should be asking... what trends can be predicted now? If recovery is around the corner, we'll want to be in high beta stocks as they are predicted to rise faster than the market rises. If you switched from low beta to high beta stocks at the bottom, you would make money off a V or U shaped recovery (go down 1X and up 2X for example).

Unfortunately, most individual investors are doing exactly the opposite - moving to low beta stocks now that their high beta shares have lost so much.]]> Mon, 27 Apr 2009 16:55:08 -0400
The source of Alpha is often the winning of a contract, and unpredictable technological breakthrough, or the best marketing mix in the sector. Those of us who do not work full time as sector analysts would be hard pressed to identify the best of class. Then, even if we did pick the best companies in each sector, our investments would have still lost half their value in the past 1.5 years due to the bursting bubbles and resulting credit crunch.

Why not seek positive Beta then? In hindsight, the one thing that could have saved us from the 2008-09 bear market would have been awareness that the housing and commodities bubbles were about to collapse. The warning signs were all there - skyrocketing prices, euphoria, the entrance of ameteurs in real estate and futures trading. Trend watching Beta seekers should have done better than Alpha seekers, presuming they weren't afraid to sit in cash for a year or so and weren't romanced by individual companies.

We should be asking... what trends can be predicted now? If recovery is around the corner, we'll want to be in high beta stocks as they are predicted to rise faster than the market rises. If you switched from low beta to high beta stocks at the bottom, you would make money off a V or U shaped recovery (go down 1X and up 2X for example).

Unfortunately, most individual investors are doing exactly the opposite - moving to low beta stocks now that their high beta shares have lost so much.]]> http://seekingalpha.com/article/133301-death-of-the-asian-development-model-exporters-chasing-a-failing-strategy?source=feed#comment-479723 479723
The baby boomers who were driving so much of that spending find themselves just a few years away from retirement with their 401(k) savings slashed in half (not that they were saving enough even before this crisis!). They face 20-30 years of poverty if they don't save every last penny during their few remaining working years.

The rise of the savings rate from -1% to +4% over the past 3 years was associated with a decline in Asian exports, despite rapidly rising Chinese supply. I suspect that 10% marks the sustainablility point for the consumer savings rate, because savings rates around this number persisted for several decades before the 1980's. At 10%, people are saving just enough for a modest retirement and to handle life's emergencies without going into debt. Consumer savings rates below that point will eventually result in an inability to retire.

Consumers from the baby boomer generation now have a savings and debt emergency on their hands. To an extent, so does generation X. They'll have to kick their savings into high gear to undo the damage of a decade building up debt while saving next to nothing.

The first things on the chopping block will be Asian exports, which tend to be entertainment, electronics, toys, and other discretionary purchases. Food, rent, utilities, clothing, communications, and healthcare, in that order, will be the new priorities. 50" LCD televisions will not.

South Korea and Australia might be OK. South Korea (EWY) exports less discretionary items like cars, ships, and steel. Australia (EWA) exports minerals.]]> Mon, 27 Apr 2009 16:37:58 -0400
The baby boomers who were driving so much of that spending find themselves just a few years away from retirement with their 401(k) savings slashed in half (not that they were saving enough even before this crisis!). They face 20-30 years of poverty if they don't save every last penny during their few remaining working years.

The rise of the savings rate from -1% to +4% over the past 3 years was associated with a decline in Asian exports, despite rapidly rising Chinese supply. I suspect that 10% marks the sustainablility point for the consumer savings rate, because savings rates around this number persisted for several decades before the 1980's. At 10%, people are saving just enough for a modest retirement and to handle life's emergencies without going into debt. Consumer savings rates below that point will eventually result in an inability to retire.

Consumers from the baby boomer generation now have a savings and debt emergency on their hands. To an extent, so does generation X. They'll have to kick their savings into high gear to undo the damage of a decade building up debt while saving next to nothing.

The first things on the chopping block will be Asian exports, which tend to be entertainment, electronics, toys, and other discretionary purchases. Food, rent, utilities, clothing, communications, and healthcare, in that order, will be the new priorities. 50" LCD televisions will not.

South Korea and Australia might be OK. South Korea (EWY) exports less discretionary items like cars, ships, and steel. Australia (EWA) exports minerals.]]> http://seekingalpha.com/article/133211-swine-flu-why-you-can-ignore-the-hype?source=feed#comment-479686 479686
Would you have panicked? ]]> Mon, 27 Apr 2009 16:16:55 -0400
Would you have panicked? ]]> http://seekingalpha.com/article/132937-is-china-the-next-great-bubble?source=feed#comment-476475 476475
Peak oil will devastate the US because we will refuse to adapt our lifestyle to this reality. The Chinese, on the other hand, are planning for the future and can see what's coming. They have a proactive attitude towards the challenge, while we have a defensive attitude and in some cases a denial attitude. We cannot accept the notion that we will be living like the Chinese one day out of economic necessity.


On Apr 24 12:17 PM ThatGuyInTheBack wrote:

> >Chinese population's rising standard of living can go on for the
> next thirty years.
>
> You forget that pesky physical limitation called "peak oil." Even
> poor countries run on relatively cheap petrol. Make that expensive
> enough (and over 30 years, it will become *much* more expensive),
> and you will see everyone's living standards fall like a rock, including
> China's.
> ]]> Fri, 24 Apr 2009 17:43:28 -0400
Peak oil will devastate the US because we will refuse to adapt our lifestyle to this reality. The Chinese, on the other hand, are planning for the future and can see what's coming. They have a proactive attitude towards the challenge, while we have a defensive attitude and in some cases a denial attitude. We cannot accept the notion that we will be living like the Chinese one day out of economic necessity.


On Apr 24 12:17 PM ThatGuyInTheBack wrote:

> >Chinese population's rising standard of living can go on for the
> next thirty years.
>
> You forget that pesky physical limitation called "peak oil." Even
> poor countries run on relatively cheap petrol. Make that expensive
> enough (and over 30 years, it will become *much* more expensive),
> and you will see everyone's living standards fall like a rock, including
> China's.
> ]]> http://seekingalpha.com/article/132937-is-china-the-next-great-bubble?source=feed#comment-476469 476469
We're not going back to the days of 0% savings rates and home equity loans being used to buy Made In China furniture, toys, and 42" plasma screens. The US consumer savings rate is currently 4+% and rising towards its historic level of 10%. It might actually surpass 15% as baby boomers make one last effort to pay off debt and save for retirement. Younger workers face incomes that have been stagnant since 2000, with a declining amount of discretionary income due to the rising cost of healthcare. Plus, younger workers are starting to save more due to chronic job instability.

Where will the first of these spending cuts come from? Rent? Utilities? Food? More likely, Chinese-made merchandise, most of which is discretionary (e.g. plastic garden gnomes, toys, electronic gadgets, fashion).

As China's revenues slow or decline, and as internal spending demands increase, Chinese demand for US treasuries will decrease even as supply increases. This will push down prices on treasuries, increasing their yields. That's just one reason I bought TBT, shorting long-term US treasuries.]]> Fri, 24 Apr 2009 17:36:02 -0400
We're not going back to the days of 0% savings rates and home equity loans being used to buy Made In China furniture, toys, and 42" plasma screens. The US consumer savings rate is currently 4+% and rising towards its historic level of 10%. It might actually surpass 15% as baby boomers make one last effort to pay off debt and save for retirement. Younger workers face incomes that have been stagnant since 2000, with a declining amount of discretionary income due to the rising cost of healthcare. Plus, younger workers are starting to save more due to chronic job instability.

Where will the first of these spending cuts come from? Rent? Utilities? Food? More likely, Chinese-made merchandise, most of which is discretionary (e.g. plastic garden gnomes, toys, electronic gadgets, fashion).

As China's revenues slow or decline, and as internal spending demands increase, Chinese demand for US treasuries will decrease even as supply increases. This will push down prices on treasuries, increasing their yields. That's just one reason I bought TBT, shorting long-term US treasuries.]]> http://seekingalpha.com/article/132858-chrysler-bankruptcy-why-car-buyers-might-not-notice?source=feed#comment-476360 476360
When's the last time you saw a Dodge Neon - on the road - that was 5 years old or more?]]> Fri, 24 Apr 2009 16:19:07 -0400
When's the last time you saw a Dodge Neon - on the road - that was 5 years old or more?]]> http://seekingalpha.com/article/132905-german-press-fiat-to-sign-deal-with-opel-not-chrysler?source=feed#comment-476338 476338
Can anyone recall a joint venture between a European or Asian car company and one of the big 3 that didn't lose billions? GM-Saab - no. Daimer-Chrysler - no. Ford-Volvo - no. Ford-Land Rover - no. Ford-Jaguar - no. GM-Opel - no. These deals lose billions every time.

As for the rationale for an Opel - Fiat combination, this is a good example of why 70% of mergers destroy shareholder value. Honda and Toyota are capable of growing organically. All the others seem focused on merger gimmickry.

If they're smart, Fiat will try to pick up some cheap Chrysler real estate, dealers, and maybe a brand name in the bankruptcy auction. Perhaps the current talks are a stalling tactic to keep Chrysler and GM alive long enough for Fiat to get together the necessary financing. After all, they're at a disadvantage to the Chinese at the bankruptcy auction. The Chinese have cash.]]> Fri, 24 Apr 2009 16:04:59 -0400
Can anyone recall a joint venture between a European or Asian car company and one of the big 3 that didn't lose billions? GM-Saab - no. Daimer-Chrysler - no. Ford-Volvo - no. Ford-Land Rover - no. Ford-Jaguar - no. GM-Opel - no. These deals lose billions every time.

As for the rationale for an Opel - Fiat combination, this is a good example of why 70% of mergers destroy shareholder value. Honda and Toyota are capable of growing organically. All the others seem focused on merger gimmickry.

If they're smart, Fiat will try to pick up some cheap Chrysler real estate, dealers, and maybe a brand name in the bankruptcy auction. Perhaps the current talks are a stalling tactic to keep Chrysler and GM alive long enough for Fiat to get together the necessary financing. After all, they're at a disadvantage to the Chinese at the bankruptcy auction. The Chinese have cash.]]> http://seekingalpha.com/article/132854-deflation-returns-to-britain?source=feed#comment-476306 476306 ----------------------...
Sorry, but you can't just take a word and decide that it "can be defined" to mean what you wish it would mean. Language doesn't work that way. Words are defined. See your Econ 101 textbook if you have one.

I believe you mean to use the term "money supply." For everyone else in the world, the term "inflation" means a period of broadly rising prices and "deflation" means a period of broadly falling prices. Prices can be related to money supply, for sure, but often move independently. They are separate concepts.

If it's the increase in money supply you are opposed to, just say so. If you think the increase in money supply will result in inflation, say so. But don't confuse people by making up your own definitions for words. I cannot understand why a grown man should be ticked off because everyone else doesn't use the definitions he made up for already well-established words.

]]> Fri, 24 Apr 2009 15:38:01 -0400 ----------------------...
Sorry, but you can't just take a word and decide that it "can be defined" to mean what you wish it would mean. Language doesn't work that way. Words are defined. See your Econ 101 textbook if you have one.

I believe you mean to use the term "money supply." For everyone else in the world, the term "inflation" means a period of broadly rising prices and "deflation" means a period of broadly falling prices. Prices can be related to money supply, for sure, but often move independently. They are separate concepts.

If it's the increase in money supply you are opposed to, just say so. If you think the increase in money supply will result in inflation, say so. But don't confuse people by making up your own definitions for words. I cannot understand why a grown man should be ticked off because everyone else doesn't use the definitions he made up for already well-established words.

]]> http://seekingalpha.com/article/132467-20-stocks-with-high-net-cash?source=feed#comment-476277 476277
I would ask exactly how these companies plan to use their cash to generate growth in the future. Will Apple invest in economies of scale to reduce the prices of their excellent computers? What is Google's plan to revolutionize how we retrieve INFORMATION, rather than just word matches from the Internet? Is Forest Laboratories going to raise their R&D budget?

A big cash cushion might prevent a company from going bankrupt within the next couple of years, but only a solid business plan will prevent them from burning through all that cash and making losses. How much cash was GM sitting on 5 years ago?
]]> Fri, 24 Apr 2009 15:17:28 -0400
I would ask exactly how these companies plan to use their cash to generate growth in the future. Will Apple invest in economies of scale to reduce the prices of their excellent computers? What is Google's plan to revolutionize how we retrieve INFORMATION, rather than just word matches from the Internet? Is Forest Laboratories going to raise their R&D budget?

A big cash cushion might prevent a company from going bankrupt within the next couple of years, but only a solid business plan will prevent them from burning through all that cash and making losses. How much cash was GM sitting on 5 years ago?
]]> http://seekingalpha.com/article/132598-brazil-s-interest-rates-will-fall?source=feed#comment-476253 476253 Hyperinflation is defined as a period of inflation higher than 50% per year. Brazil's 10-15% past inflation range was "high" inflation, but never qualified as "hyper."

Observation 2:
Falling interest rates may reduce the exchange value of Brazil's currency compared to, for example, the USD which will see rising interest rates in about 1.5 years (unless Bernanke repeats the mistake of his mentor).

Observation 3:
Brazillian long-term bonds bought at today's interest rates will appreciate rapidly as rates decrease in the future. However, as observation 2 points out, these benefits may be slightly reduced for dollar-based investors by a falling Brazillian real.

Observation 4:
The appreciation of Brazilian stocks will likely far outpace any currency depreciation issues (also changes in long-term fx rates are only hypothetical. Lower interest rates have a concrete effect on Brazillian growth.). With a hypothetical ceiling on its currency set by contrarian interest rate moves and low interest rates in general, Brazil could exceed the economic growth of China in just a few years. Unlike China, however, Brazil is an established democracy.

Observation 5:
EWZ has a P/E of less than 8 (!!!!!!)

Observation 6:
You're right. EWZ is a buy. I'm already up 30% but additional investment is easily justified. EWA, EWY, and VWO are similar bargains.]]> Fri, 24 Apr 2009 15:04:01 -0400 Hyperinflation is defined as a period of inflation higher than 50% per year. Brazil's 10-15% past inflation range was "high" inflation, but never qualified as "hyper."

Observation 2:
Falling interest rates may reduce the exchange value of Brazil's currency compared to, for example, the USD which will see rising interest rates in about 1.5 years (unless Bernanke repeats the mistake of his mentor).

Observation 3:
Brazillian long-term bonds bought at today's interest rates will appreciate rapidly as rates decrease in the future. However, as observation 2 points out, these benefits may be slightly reduced for dollar-based investors by a falling Brazillian real.

Observation 4:
The appreciation of Brazilian stocks will likely far outpace any currency depreciation issues (also changes in long-term fx rates are only hypothetical. Lower interest rates have a concrete effect on Brazillian growth.). With a hypothetical ceiling on its currency set by contrarian interest rate moves and low interest rates in general, Brazil could exceed the economic growth of China in just a few years. Unlike China, however, Brazil is an established democracy.

Observation 5:
EWZ has a P/E of less than 8 (!!!!!!)

Observation 6:
You're right. EWZ is a buy. I'm already up 30% but additional investment is easily justified. EWA, EWY, and VWO are similar bargains.]]> http://seekingalpha.com/article/132676-paulson-throws-bernanke-under-the-bus-backs-ken-lewis?source=feed#comment-476202 476202
Next, his "fiduciary duty" to shareholders was to squeeze the most money and the best terms out of his new creditor, the government. He figured threatening to back out of the deal would do that. It was certainly worth a shot. In a best case scenario, BAC would get to keep the govt. loans but not have to take on Merrill's losses. Merrill would go under, but the loans would allow BAC to survive the losses.

Paulson anticipated such brinksmanship and was having none of it. As a creditor and shareholder to BAC, the govt. had little leverage but they could probably get the already-on-thin-ice board and management fired. Paulson alluded to that leverage, and the brinkmanship was over.

Results of this minor skirmish: BAC lost, taxpayers won.]]> Fri, 24 Apr 2009 14:35:54 -0400
Next, his "fiduciary duty" to shareholders was to squeeze the most money and the best terms out of his new creditor, the government. He figured threatening to back out of the deal would do that. It was certainly worth a shot. In a best case scenario, BAC would get to keep the govt. loans but not have to take on Merrill's losses. Merrill would go under, but the loans would allow BAC to survive the losses.

Paulson anticipated such brinksmanship and was having none of it. As a creditor and shareholder to BAC, the govt. had little leverage but they could probably get the already-on-thin-ice board and management fired. Paulson alluded to that leverage, and the brinkmanship was over.

Results of this minor skirmish: BAC lost, taxpayers won.]]> http://seekingalpha.com/article/132883-long-treasury-bonds-vs-short-deflation-vs-inflation?source=feed#comment-475660 475660
This ideological difference in definitions will become more and more important in the coming years, as money supply continues to increase while price increases remain low or negative. Some people will insist that such a situation is a high-inflation scenario while others will point to the low increases or even decreases in prices (e.g. CPI, PPI, deflator #'s). Their perceptions and investment choices will depend on what definition of "inflation" they are using.

One side of this debate will win and the other will lose big. As an investor, you will have to commit to one way or the other. ]]> Fri, 24 Apr 2009 10:25:49 -0400
This ideological difference in definitions will become more and more important in the coming years, as money supply continues to increase while price increases remain low or negative. Some people will insist that such a situation is a high-inflation scenario while others will point to the low increases or even decreases in prices (e.g. CPI, PPI, deflator #'s). Their perceptions and investment choices will depend on what definition of "inflation" they are using.

One side of this debate will win and the other will lose big. As an investor, you will have to commit to one way or the other. ]]> http://seekingalpha.com/article/132721-geithner-to-put-chrysler-in-bankruptcy-next-week?source=feed#comment-475583 475583 ERISA) passed back in the early 70's puts taxpayers on the hook anytime a corporation offering pensions goes under and the pension fund is underfunded. It's sort of like the FDIC of the pension world. Look it up.

Obama does not have a choice here, aside from trying to repeal the law or break the law. If you don't like the law, complain about the law.

Also, the government can legitimately force Chrysler into bankruptcy because (1) overseeing and mandating bankruptcies is a fundamental and traditional role of government in capitalistic societies, and always has been since the days of debtor's prisons, and (2) the government is a creditor of Chrysler's and therefore has an ownership stake in Chrysler's remaining assets just like the hedge funds and other bondholders.

What each creditor gets will be determined in bankruptcy court - a tradition of government intervention that has existed for hundreds of years in capitalist societies.



On Apr 23 11:59 PM bricki wrote:

> UAW pensions are already guaranteed by ERISA so it doesn't matter
> if they are protected by the bankruptcy or by the ERISA legislation,
> the taxpayer is stuck. Having the pensions handled outside ERISA
> is probably a good idea because the guarantee agency is already on
> very thin ice.
>
> Since Chrysler is a privately held company the government and the
> owners Cerberus Capital can come to any agreement they want to as
> far as applying for bankruptcy protection. Nothing particularly sinister
> here since Cerberus has effectively already washed their hands when
> they refused to recapitalize Chrysler.
>
> It would be a lot more disturbing if Geitner were to do something
> like this to a public company.
> ]]> Fri, 24 Apr 2009 09:54:25 -0400 ERISA) passed back in the early 70's puts taxpayers on the hook anytime a corporation offering pensions goes under and the pension fund is underfunded. It's sort of like the FDIC of the pension world. Look it up.

Obama does not have a choice here, aside from trying to repeal the law or break the law. If you don't like the law, complain about the law.

Also, the government can legitimately force Chrysler into bankruptcy because (1) overseeing and mandating bankruptcies is a fundamental and traditional role of government in capitalistic societies, and always has been since the days of debtor's prisons, and (2) the government is a creditor of Chrysler's and therefore has an ownership stake in Chrysler's remaining assets just like the hedge funds and other bondholders.

What each creditor gets will be determined in bankruptcy court - a tradition of government intervention that has existed for hundreds of years in capitalist societies.



On Apr 23 11:59 PM bricki wrote:

> UAW pensions are already guaranteed by ERISA so it doesn't matter
> if they are protected by the bankruptcy or by the ERISA legislation,
> the taxpayer is stuck. Having the pensions handled outside ERISA
> is probably a good idea because the guarantee agency is already on
> very thin ice.
>
> Since Chrysler is a privately held company the government and the
> owners Cerberus Capital can come to any agreement they want to as
> far as applying for bankruptcy protection. Nothing particularly sinister
> here since Cerberus has effectively already washed their hands when
> they refused to recapitalize Chrysler.
>
> It would be a lot more disturbing if Geitner were to do something
> like this to a public company.
> ]]> http://seekingalpha.com/article/132543-gaping-hole-in-the-deflation-argument?source=feed#comment-474902 474902
1) Inflation does not equal changes in the supply of money. It is a long-term increase in prices. See your econ. textbook.

2) The vast majority of the "stimulus" packages went to purchase things (bonds, treasuries, equity, etc.). These were largely transactions, not handouts (the summer 2008 "stimulus checks" on the other hand, were handouts). These transactions are reversible.

3) Assuming that paying 20% over historically high spot metal prices for collector coins will protect your purchasing power from inflation. That will depend on whether your collector coins will, in the future, be in higher demand than the assets that could otherwise be bought with that money.

It used to be considered common-sense wisdom that real estate was the best way to protect oneself against inflation. After all, there's a fixed amount of it and you can always raise rents. In fact, generic real-estate pundits like Robert Kiyosaki advocated buying up residential housing in 2006 on the justification that inflation HAD TO BE right around the corner and that real estate prices were rising because people were finally figuring this out. People who took that advice bought at the peak of the bubble. Might there be a lesson there for gold investors?
]]> Thu, 23 Apr 2009 17:34:48 -0400
1) Inflation does not equal changes in the supply of money. It is a long-term increase in prices. See your econ. textbook.

2) The vast majority of the "stimulus" packages went to purchase things (bonds, treasuries, equity, etc.). These were largely transactions, not handouts (the summer 2008 "stimulus checks" on the other hand, were handouts). These transactions are reversible.

3) Assuming that paying 20% over historically high spot metal prices for collector coins will protect your purchasing power from inflation. That will depend on whether your collector coins will, in the future, be in higher demand than the assets that could otherwise be bought with that money.

It used to be considered common-sense wisdom that real estate was the best way to protect oneself against inflation. After all, there's a fixed amount of it and you can always raise rents. In fact, generic real-estate pundits like Robert Kiyosaki advocated buying up residential housing in 2006 on the justification that inflation HAD TO BE right around the corner and that real estate prices were rising because people were finally figuring this out. People who took that advice bought at the peak of the bubble. Might there be a lesson there for gold investors?
]]> http://seekingalpha.com/article/132647-evidence-that-end-of-housing-price-collapse-is-not-far-off?source=feed#comment-474862 474862
Not even OPEC can manage to keep its handful of members from cheating on oil production levels. Why would an illegal cartel of competing banks and mortgage companies be any more successful?



On Apr 23 01:12 PM conceptwizard wrote:

"The banks are definitly manipulating the market. "

"If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They'd also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. "]]> Thu, 23 Apr 2009 17:08:13 -0400
Not even OPEC can manage to keep its handful of members from cheating on oil production levels. Why would an illegal cartel of competing banks and mortgage companies be any more successful?



On Apr 23 01:12 PM conceptwizard wrote:

"The banks are definitly manipulating the market. "

"If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They'd also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. "]]> http://seekingalpha.com/article/132573-retail-energy-utilities-caught-between-bad-regulators-and-distressed-customers?source=feed#comment-474684 474684
I suspect, however, that the utilities are a golden goose for both executives and regulators. Both have to show results that satisfy their constituents. However, they must do so in a way that doesn't draw attention to their destructive essence.

For example: if the utility fought back with rolling blackouts, aggressive shutoffs, or lawsuits in an attempt to preserve shareholder returns, it would be a PR nightmare for both sides. Some would see executive compensation and dividends as being treated with more importance than the common man. Others would see the negative effects of hyper-regulation and political interference finally showing their consequences.

A slow, quiet milking of the good customers, though, is a win-win for all sides.]]> Thu, 23 Apr 2009 15:21:31 -0400
I suspect, however, that the utilities are a golden goose for both executives and regulators. Both have to show results that satisfy their constituents. However, they must do so in a way that doesn't draw attention to their destructive essence.

For example: if the utility fought back with rolling blackouts, aggressive shutoffs, or lawsuits in an attempt to preserve shareholder returns, it would be a PR nightmare for both sides. Some would see executive compensation and dividends as being treated with more importance than the common man. Others would see the negative effects of hyper-regulation and political interference finally showing their consequences.

A slow, quiet milking of the good customers, though, is a win-win for all sides.]]> http://seekingalpha.com/news/market_currents/post/22460?source=feed#comment-474658 474658
en.wikipedia.org/wiki/...

Even if they raise rates on new treasuries and therefore have to sell the old ones for a loss, that still represents at least $3 trillion in open-market liquidity that can be removed from the markets.

Then there are hundreds of billions in bank bonds, preferred stock, and common equity that have been purchased recently. Markets for these items are just fine in terms of liquidity, even as bad as things are now. The Fed could sell these items within a month and remove hundreds of billions of dollars from circulation.

Finally, the government always has the option of selling the mortgages at auction for low prices. Liquidity will appear when the right ROI is offered, I assure you.

As a last resort, interest rates in the 7-15% range would crush money supply and inflation - just like it did in the early 80's.

Quite an arsenal. Perhaps we should instead be asking what weapons the government has to fight deflation, with interest rates near zero and little political will for more expansionary policies.]]> Thu, 23 Apr 2009 15:04:48 -0400
en.wikipedia.org/wiki/...

Even if they raise rates on new treasuries and therefore have to sell the old ones for a loss, that still represents at least $3 trillion in open-market liquidity that can be removed from the markets.

Then there are hundreds of billions in bank bonds, preferred stock, and common equity that have been purchased recently. Markets for these items are just fine in terms of liquidity, even as bad as things are now. The Fed could sell these items within a month and remove hundreds of billions of dollars from circulation.

Finally, the government always has the option of selling the mortgages at auction for low prices. Liquidity will appear when the right ROI is offered, I assure you.

As a last resort, interest rates in the 7-15% range would crush money supply and inflation - just like it did in the early 80's.

Quite an arsenal. Perhaps we should instead be asking what weapons the government has to fight deflation, with interest rates near zero and little political will for more expansionary policies.]]> http://seekingalpha.com/article/132561-chrysler-s-clock-is-ticking?source=feed#comment-474632 474632 ----------------------...
Toyota is being liquidated???]]> Thu, 23 Apr 2009 14:48:10 -0400 ----------------------...
Toyota is being liquidated???]]> http://seekingalpha.com/article/132204-here-s-why-i-m-happy-i-drive-a-ford?source=feed#comment-474544 474544
> I really like the idea of a gas tax! It would do more to un-elect
> politicians in a single stroke than term limits or anything else.

We already pay a gas tax. Most of our national debt was accrued defending our access to Persian Gulf oil. If you know a dead or disabled veteran, he or she paid part of the tax too.

Oil costs both blood and money, and you pay only a fraction of the money at the pump. If Exxon and Conaco had to pay to defend their access to oil. Gasoline would run about $10-15 / gal. Instead, they're taxpayer subsidized.]]> Thu, 23 Apr 2009 13:59:54 -0400
> I really like the idea of a gas tax! It would do more to un-elect
> politicians in a single stroke than term limits or anything else.

We already pay a gas tax. Most of our national debt was accrued defending our access to Persian Gulf oil. If you know a dead or disabled veteran, he or she paid part of the tax too.

Oil costs both blood and money, and you pay only a fraction of the money at the pump. If Exxon and Conaco had to pay to defend their access to oil. Gasoline would run about $10-15 / gal. Instead, they're taxpayer subsidized.]]> http://seekingalpha.com/article/131988-five-myths-about-business-failure-in-a-downturn?source=feed#comment-474451 474451 ----------------------...
In American culture, our ideal mythic leader is decisive, unwavering, and determined to force his leadership upon the group. You see this in our entertainment ("24", John Wayne), in our politics (protestors dressed as "flip flops" mocking politicans for changing their mind), and in our corporations (Ivy League degrees).

For executives who are paid millions of dollars in company resources, the job is to embody this cultural ideal so that their employers and employees will continue to see them as the proper and legitimate leader, deserving of the rewards. For them, continued rewards are tied to obtaining political support by conforming to expectations.

Yet, the modern business world is increasingly incompatible with our cultural ideal of a leader:

1) Decisions must be made - increasingly by teams, not individuals - based on a tentative interpretation of a vast amount of vauge data, which puts "decisive" leaders at a disadvantage because they jump to conclusions too soon. Perhaps many of Chrysler's recent mistakes in product development and quality control were based on decisions made by decisive leaders and then never questioned.

2) The business, economic, and technological environment is in constant flux, which means that "unwavering" leaders might be correct exactly once before reality changes a week or an hour later and makes them incorrect. Successful companies today are the ones that are (a) nimble, and (b) constantly studying changes in reality so that they know how to adapt. "Unwavering" companies are also known as sitting ducks.

Meanwhile, being an effective contributor - teamwork - is now much more important than individual fortitude, dominance, or ambition. There are too much data to analyze, too many systems to learn, too much specialized knowledge to remember, and too many languages to speak for one mythic leader to drive an organization's success alone just on the basis of hard work and determination. Increasingly, the task of managers is to find ways to unlock and collaborate the talents of their teammates and to then assign them credit for the positive results, rather than taking credit themselves like an arrogant jackass.

Unless the American cultural ideal for leadership changes, expect more of the same.]]> Thu, 23 Apr 2009 13:13:53 -0400 ----------------------...
In American culture, our ideal mythic leader is decisive, unwavering, and determined to force his leadership upon the group. You see this in our entertainment ("24", John Wayne), in our politics (protestors dressed as "flip flops" mocking politicans for changing their mind), and in our corporations (Ivy League degrees).

For executives who are paid millions of dollars in company resources, the job is to embody this cultural ideal so that their employers and employees will continue to see them as the proper and legitimate leader, deserving of the rewards. For them, continued rewards are tied to obtaining political support by conforming to expectations.

Yet, the modern business world is increasingly incompatible with our cultural ideal of a leader:

1) Decisions must be made - increasingly by teams, not individuals - based on a tentative interpretation of a vast amount of vauge data, which puts "decisive" leaders at a disadvantage because they jump to conclusions too soon. Perhaps many of Chrysler's recent mistakes in product development and quality control were based on decisions made by decisive leaders and then never questioned.

2) The business, economic, and technological environment is in constant flux, which means that "unwavering" leaders might be correct exactly once before reality changes a week or an hour later and makes them incorrect. Successful companies today are the ones that are (a) nimble, and (b) constantly studying changes in reality so that they know how to adapt. "Unwavering" companies are also known as sitting ducks.

Meanwhile, being an effective contributor - teamwork - is now much more important than individual fortitude, dominance, or ambition. There are too much data to analyze, too many systems to learn, too much specialized knowledge to remember, and too many languages to speak for one mythic leader to drive an organization's success alone just on the basis of hard work and determination. Increasingly, the task of managers is to find ways to unlock and collaborate the talents of their teammates and to then assign them credit for the positive results, rather than taking credit themselves like an arrogant jackass.

Unless the American cultural ideal for leadership changes, expect more of the same.]]> http://seekingalpha.com/article/131649-the-bull-and-the-bear-case-for-hog?source=feed#comment-474190 474190
2) Harley is among the most discretionary of discretionary purchases - and a massive purchase too. Therefore, consumers who have been unable to refinance their soon-to-reset, underwater ARMs, who have seen their credit card rates increase, and who face the daily risk of layoffs will postpone this purchase first of all. Of course, in an economic recovery, all these factors will sort themselves out. However, I suspect that we have seen the last of 0% consumer savings rates and the housing ATM. In the future, consumer savings will return to the long-term norm of 10% of income (up to 4% so far). Many of Harley's customers were spending that 10% on their bike payments! Many others took out home equity loans to pay cash for their bikes (I suppose if your house is foreclosed, such a maneuver got you a free bike!). This long-term shift is what should really be troubling HOG shareholders, because it challenges the whole business model.

3) Harley's dependence on outside credit and securitization is troubling. At least Countrywide Mortgage can recover ~50% of their principal through foreclosure and resale. What does the lender get when somebody quits making motorcycle payments? A rapidly depreciated bike with massive foreclosure, hauling, storage, and resale costs? Does Harley have the cash resources to self-finance if their subprime loans cannot be securitized and resold? I would imagine Harley securitized instruments are currently selling for less than the $0.30-$0.50 on the dollar that subprime mortgage securities are selling for. How do you finance your customers in an environment like that, other than self-financing?

]]> Thu, 23 Apr 2009 11:06:48 -0400
2) Harley is among the most discretionary of discretionary purchases - and a massive purchase too. Therefore, consumers who have been unable to refinance their soon-to-reset, underwater ARMs, who have seen their credit card rates increase, and who face the daily risk of layoffs will postpone this purchase first of all. Of course, in an economic recovery, all these factors will sort themselves out. However, I suspect that we have seen the last of 0% consumer savings rates and the housing ATM. In the future, consumer savings will return to the long-term norm of 10% of income (up to 4% so far). Many of Harley's customers were spending that 10% on their bike payments! Many others took out home equity loans to pay cash for their bikes (I suppose if your house is foreclosed, such a maneuver got you a free bike!). This long-term shift is what should really be troubling HOG shareholders, because it challenges the whole business model.

3) Harley's dependence on outside credit and securitization is troubling. At least Countrywide Mortgage can recover ~50% of their principal through foreclosure and resale. What does the lender get when somebody quits making motorcycle payments? A rapidly depreciated bike with massive foreclosure, hauling, storage, and resale costs? Does Harley have the cash resources to self-finance if their subprime loans cannot be securitized and resold? I would imagine Harley securitized instruments are currently selling for less than the $0.30-$0.50 on the dollar that subprime mortgage securities are selling for. How do you finance your customers in an environment like that, other than self-financing?

]]>