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  • Netbook Sales: Cannibalizing Notebooks or Incremental?  [View article]
    Per the comments, for the ordinary person - not the business or home power user - a netbook is more than sufficient. I think it will cannibalize for some segments and not others. Frankly, notebooks have come down in price a bit (esp. lower end) so I don't see a major price distinction on the hardware side - the software, on the other hand - thinking MSFT - has not come down that much unless you have a way to buy it at a discount. I understand why there is so much pirating of software in some countries. Software cost / Median Income = Large %.
    Jan 17, 2009. 04:13 PM | Likes Like |Link to Comment
  • SAP's CEO and SaaS: Is Denial Working?  [View article]
    We must remember that in comparing SAP/Oracle to many of the SaaS vendors it is not a direct compare. Sure, SaaS, which I've implemented and have used to run a team, has been more often used in the SMB market - they get immediate value vs. spreadsheets and it's an order of magnitude better than what many of the firms are using ... compare that w/ an enterprise firm that has significant integration challenges - the value gap is not as clear. Many enterprise firms are going to SFDC, but also realizing that the integration hills are many, esp. given that their mission critical back-end systems are often SAP and/or Oracle. A silo'd SFA or front-office system does not work well in an enterprise environment, never mind the BI systems, the resource management, the T&E, etc. systems. Software is a tool that can be used to improve and automate business processes. The issues w/ the tool go far beyond the delivery mode.
    Jan 17, 2009. 12:20 PM | 1 Like Like |Link to Comment
  • Why the Housing Stats Are Lumpy  [View article]
    In terms of extrapolating the info, it would be nice to disaggregate via multiples (e.g., 2x, 3x, etc.) times median income for the market ... in some areas of the country, a million will get you quite a home, in others, not so much. Given the local flavor of the markets, I think we need to look at multiples of median income vs. a nominal dollar value.

    Good analysis - I like when people disaggregate or de-average the numbers - you can generally get a better picture and be more specific in recommendations. I think the government will have an uphill battle if they are trying to "re-create" the housing/mortgage bubble we are currently de-leveraging from - it's not an exemplar for the economy. Consumerism and leverage will eventually break down - you can only get something for nothing for so long. The dot-bomb showed us that the fundamentals of business, economics, and valuation eventually come back home.
    Jan 17, 2009. 11:01 AM | 5 Likes Like |Link to Comment
  • Merrill Lynch Datapoint of the Day  [View article]
    I'm somewhat ambivalent on BAC. I'm a long time customer and I now own their stock - individually and in funds. At this point, I think they are "too big to fail." The government (taxpayers) has back-stopped them and has an escalation of commitment in terms of sunk costs. I hope that BAC really focuses on integration - back and front office - and leveraging all the assets they have. I would prune back all the under-performing assets and really try to have the core engine running well. The Citi supermarket model is tough to manage. I'm not sure on Lewis. He will be in the spotlight for the next few months - at a min - so we'll see. I have a feeling that BAC will be doing some loan mods and forgiveness in the near future (cf. to Citi and the govt ownership and control), which will stir up a number of lawsuits. We'll see how BAC handles it.
    Jan 17, 2009. 09:25 AM | Likes Like |Link to Comment
  • Mortgage Cramdowns: A Disaster in the Making  [View article]
    I can see a loan mod (vs. forgiveness) if it's a good investment (there is a business case) and the homeowner has some skin in the game - a plan, a stake, a path. I was not in favor of the auto companies getting money, but at least there were some convenants and responsibilities on their part before the money was loaned (cf. to some of the financial firms). This legislation needs to be monitored very closely and it needs to be tight and specific. There will be some legal challenges - no doubt - with the final verdict taking years to come to fruition.
    Jan 10, 2009. 10:48 AM | Likes Like |Link to Comment
  • Can Obama Meet His Great Economic Expectations?  [View article]
    There is a well-known saying that can often be heard from sales reps - "Don't confuse selling with delivery." Sales reps often promise things that they can't deliver on and set expectations that can't possibly be achieved (note: I've done this myself and paid for it in the end).

    Managing expectations is one of the most critical skills in politics, business, and relationships. My fear with lofty rhetoric and over-reaching promises is that they set people up for a fall ... I hope Obama is successful - it's partly my money after all - but I do think he needs to be careful with over-stating his case, which is one of the quickest ways to lose credibility and status.
    Jan 9, 2009. 09:13 PM | 2 Likes Like |Link to Comment
  • Still Blaming the Market Victims  [View article]
    There are some fundamental truths in this piece around saving and consuming. Those that save and defer often (not all the time) subsidize those who consume and want immediacy (on a personal and country basis). As low as rates were, many people did not bite - they did not change their fundamental equation around inflows and outflows. There were definitely some lax underwriting standards and ratings, but we know who they are paid by - the very people they are rating. Skepticism is a good mindset to have when things sound too good to be true. Not everyone should be able to get easy credit or they should at least pay the consequences for their decisions - no public net. Prudence and prioritization should be rewarded.
    Jan 7, 2009. 08:54 AM | 2 Likes Like |Link to Comment
  • The Danger in Financial Stocks in 2009  [View article]
    This is a good summary. It's hard to disagree with points made. Many of the banks will have challenges in maintaining their revenue streams - more charge offs on CC's, less mortgages/loans being done, and overall margin-rich fee revenue down - along with asset write-downs/offs. All of us have to question to ability of the banks to understand their own risk (e.g., level 2 and 3 assets). I'm not sure they do understand their book - their underwriting standards across assets are in question. Time will tell if the big banks can exploit the synergies with recent acquisitions. The next year is likely to be bumpy and who knows how the government intervention will turn out. Lots of uncertainty - more cash sitting on the sidelines.
    Jan 6, 2009. 08:33 AM | Likes Like |Link to Comment
  • Should Executive Pay Indeed Be Capped?  [View article]
    I have sat in front of executives who made $3-5M or more in the previous year. Many of them were not worth the money. Most were smart, but smarts are not enough. The pay for performance contract has been breached, and we all know it.

    The real difference in comp has been around options and the other non-salary comp components. Some of the best CEO's are paid the least and some of the worst, the most. One has to only look at the latest emblematic CEO's with the financial firms - $50M+ comp packages, while the ship is being loaded with explosives and patched with duck tape. A classic case of mortgaging the future - literally and figuratively. Read The Halo Effect for a good perspective on how we view performance and all its attributes. Most CEO's just need to be on the right side of the business cycle to be called geniuses. When performance is good (the Halo) we only see the good - commanding, open, value driven, etc., etc. When performance drops and the business cycle changes - the take can be millions (over a few years) and the parachute package even greater.

    I have no issue paying for genuine Alpha (beating a relevant and credible benchmark), esp. over a period of time (e.g., restricted stock becomes worth more if there is Alpha over X period of time). My issue is paying for incompetence and malfeasance - how many can we name - Enron, ML, Citi, Fannie/Freddie, GS, Countrywide, etc. It's too many to be an exception. I never did like private gains and public losses -and with the way we are spending taxpayer money today - I like it even less.
    Jan 5, 2009. 07:53 PM | Likes Like |Link to Comment
  • Taleb vs Merton, Cont.  [View article]
    This is an interesting feud. Like most things, there is some veracity in both of their positions. When you paint it as X or Y, it makes for a better story. As with any metric, if you only look at one, you will probably not see the true picture - but, without trying to quantify something, it becomes very difficult to agree on definitions, assumptions, and meaning. If it's so "soft" that you can't put a number around it, what is it exactly - how do you know when you see it. Also, most metrics should be looked at as more of a range or confidence interval type vs. point estimates. The latter are just not that precise.

    There is great article around VaR (Value at Risk) in The New York Times by Joe Nocera. Basically, VaR took on a life of it's own and was used as an incentive comp metric for risk managers and others. As you can imagine, it was gamed and risk managers "packed" risk into the tails of a distribution and could lower the VaR number with CDS' and various puts.

    I'd like to see some integration of both NT's position and Merton. The tail probabilities are higher than we think and can have more of an impact - we should fully explore and quantify those. Also, Beta and portfolio theory give us some insight into volatility and diversification, but not the full picture. At the end of the day, you can't outsource judgment to a metric - it needs to be integrated with your experience, values, and objectives. The search for some sort of unified theory or an SAT like metric will probably continue, but should be seen for what it is.
    Jan 4, 2009. 01:04 PM | 2 Likes Like |Link to Comment
  • Year-End Buyouts: Big Challenges for the Big Banks  [View article]
    It's interesting how Lewis has often blamed his failings on anything but himself and his actions, which I've written about in previous posts. I'd like to see a more "mature" management style and personal ownership. I'm still amazed at how many emails and letters I get from BAC that demonstrate how siloed their customer database is and how fractured their marketing efforts are. I'll be very interested to see if Lewis can exploit his assets and up-sell and cross-sell the BAC customer base, which has grown significantly. We all own BAC at this point and I would like to see them be successful, but I don't want to see the taxpayer throw good money after bad. The too big to fail model is a little scary and puts all of us at some risk.
    Jan 4, 2009. 10:29 AM | 1 Like Like |Link to Comment
  • United Socialist States of America? Not Quite  [View article]
    Vitaliy makes some great points. Many people are binary when it comes to comparisons - it makes for good copy and it sounds definitive. However, most things are on a continuum - as there are gradations around capitalism, socialism, communism and various permutations. At the end of the day, time will tell how fast our government wants to get out of the private investment/bailout business.

    I agree that there needs to be some regulations and oversight - it's often a fine line in terms of too much. The pedulum usually over-corrects. I do think we need to be careful around the "diseases of responsibility." We are all responsible (ability to respond) animals that have free-will and volition. Most of what we do is not under duress. We need to ensure that some people taste the sting of failure and poor choices. When we consistently have a public "net" underneath, we pervert the whole feedback mechanism, which is the basis for learning and self-regulation.
    Jan 3, 2009. 02:43 PM | Likes Like |Link to Comment
  • M&A Lessons from 2008: Take the Money and Run  [View article]
    I was not happy with the Yahoo! decision ... I thought Yang breached his fiduciary duty and was too close to his "baby" to not get his imagined price. I have shares in both MSFT and YHOO. The author is right in that management does not want to lose control - the shareholder language often seems specious. Time will tell is these firms made the "right" decisions, but in the near term it doesn't appear that they maximized shareholder value. The cash issue is all about certainty - if you believe in the synergies, you'll pay cash; if you're less certain and you have some bloated stock currency, you'll pay in stock.
    Jan 2, 2009. 11:02 AM | Likes Like |Link to Comment
  • Consumers Spending Less Than Justified by Actual Income  [View article]
    This seems like a pretty simple analysis - more unidimensional. Per the other comments, the new "normal" should include more savings (we had a negative savings rate in the last couple of years), less credit card use (overall credit limits will be re-set), less home equity loans (people have been burned and banks are less willing), and more risk on the job front (risk = caution and less spending). We can't extrapolate from the last 3-5 years in terms of spending - as we are now seeing that it was all built on a house of cards that included high amounts of leverage, risk, and correlated bets. Personally, I don't see the same level of consumerism that we had - it was not sustainable.
    Jan 2, 2009. 09:22 AM | 2 Likes Like |Link to Comment
  • What Do We Need In 2009? More Failure  [View article]
    This piece is on-target. The mark of a psychologically healthy person or company is their ability and willingness to take responsibility for their actions and choices. The playing field is not always clear-cut, but the themes are usually clear - do you have an internal locus (personal responsibility) vs. an external locus on control (something outside your control). There are many things outside of our control, but our attitude and language around them is pretty telling. We all know people or companies that typically blame something or someone outside of themselves for their problems without taking-on some responsibility. The real issue is doing a clawback on those who knowingly and willfully planted (and cultivated) the seeds of failure and walked away with millions.
    Jan 1, 2009. 11:10 AM | 6 Likes Like |Link to Comment