Seeking Alpha

connellybarnes

connellybarnes
Send Message
View as an RSS Feed
View connellybarnes' Comments BY TICKER:
Latest  |  Highest rated
  • GCVRZ Forum [View instapost]
    I used to get cheap Lagavulin* in Princeton's sketchy basement grad student bar called "dbar" ("debasement bar"). I still prefer it to Laphroaig but can't find it around here.

    * For unknown reasons, they frequently would give out drinks for under cost.
    Nov 24, 2014. 10:09 PM | 1 Like Like |Link to Comment
  • GCVRZ Forum [View instapost]
    Congratulations on the U.S. approval! Although I think this is more important for MS patients than investors.

    Good luck everyone on the 400M sales hurdle.

    The FDA is a poster child for regulatory capture. I think it should be stripped of its present authority and replaced by an industry self-regulatory body that forwards recommended drugs to a small "shell" governmental body, which would be mandated to outsource all reviews to outside non-conflicted scientists. As James Madison argued: men are not angels, so separate the powers.

    http://bit.ly/1v7ffGC
    Nov 24, 2014. 09:53 PM | 3 Likes Like |Link to Comment
  • Whiting USA Trust: Likely To Drop Back To Its Fair Value In The Coming Days; $1.50 Price Target [View article]
    The folly of man knows no limits.
    Nov 14, 2014. 07:35 PM | Likes Like |Link to Comment
  • King Digital: What The Future Holds [View article]
    Kong is a rubber dog toy:

    http://bit.ly/1xy3YQE

    Lit up is a song about cocaine:

    http://bit.ly/1xy41fk

    King is an avalanche of money.
    Nov 13, 2014. 11:43 PM | Likes Like |Link to Comment
  • How P/B Reveals Xinyuan Real Estate's Value [View article]
    I have no position in Xinyuan currently. The major concerns to me of Xinyuan are debts, jets, and mis-management.

    High debt relative to assets does indeed increase the probability of bankruptcy of a company.

    A good metric for bankruptcy probabilities is the Altman Z-score. You can read about it on Wikipedia or in the study by Altman at NYU [1]. The study by Altman found that 80-90% of firms with a Z-score of below 2.675 go bankrupt within two years. GuruFocus claims [2] that Xinyuan's Z-score is currently 1.35, although it is probably better to calculate this manually since these apps can have data errors. And who knows whether U.S. statistics can be applied to Chinese companies, but nevertheless it is an interesting metric.

    Of course it is rational to invest even in firms that are likely to go bankrupt at a price that is a discount to their intrinsic value when bankruptcy probability has been factored in. However from what I have seen, one danger of such likely-bankrupt situations is the common stock can become overpriced due to cognitive errors among retail investors. My guess is that this happens due to loss aversion and lack of understanding of seniority of the capital structure. As well as the base rate fallacy, where investors might ignore the base rate probability of bankruptcy for whatever situation they are in. For one of many examples see COCO which arguably should trade at much less than $0.16 (Personally I would not pay more than $0 for COCO. It's bankruptcy probability has got to be above 99%).

    If Xinyuan management did not add so much debt the company could survive indefinitely and therefore the equity would be worth much more (at least the way I would handicap it). So obviously the debt level would be a big factor if I decided to invest in Xinyuan again.

    [1]. http://bit.ly/1xbk4iT
    [2]. http://bit.ly/1uE2oy0)
    Nov 6, 2014. 11:20 PM | Likes Like |Link to Comment
  • Xinyuan: The Company Of 10,000 Frustrations [View article]
    @HerrX: Thanks for the explanation about Argentina and your thoughts on BXE -- I will check that out. In general U.S. stocks seem disgustingly expensive so I should be looking elsewhere.
    Nov 1, 2014. 02:38 PM | Likes Like |Link to Comment
  • Xinyuan: The Company Of 10,000 Frustrations [View article]
    No kidding! I bought a bunch of these cheap cigar butts in bulk 1 year ago. I've sold out of them now, since my rule was to hold them for 1 year and see what happens. (I'm a scientist).

    Some of them like the Argentina companies I was astonished that the positions were profitable. Argentina's government claims its inflation is 11% but money markets are at 14-20%. The government is bankrupt and fines economists who put out "high" inflation figures. So I guess the money markets are right. A number of the stock tickers just trend straight down long-term because of the inflation. It's bizarre that a position could end up profitable in a country with 14-20% inflation. But who knows I guess if you buy something cheap enough mean reversion could win over inflation.

    Others like Xinyuan I thought well, they have big inside ownership, if they are remotely rational and it is not a fraud it should work out fine, especially with the long-term real estate demographics. But now Xinyuan is a third the price I bought for.

    It seems like more of a buy than before but you have to wonder whether the CEO will keep loading up debt and fly his company into a hill. Personally I would rather he donate the jet to me and avoid destroying his company. Also, it is not totally rational to fly in private aircraft -- commercial is safer. But even if you want to fly in private aircraft, everyone knows you should do it on a rental basis through companies like NetJets. You don't want to end up with sole ownership of a jet which is 1/5 of your company's market cap, and eats up money like crazy, and not rent it out. It's one of those classic situations where money is being shoveled into a furnace.

    Is the CEO rational? If so, what game is he playing at?

    I thought I would use the experiences I learned tracking all these companies to try and handicap investments myself better in the future. But I kind of feel that the variance is so high in these situations that I have an easier time understanding businesses that are at least medium quality or else have activists. If I do any more deep value I'm going to be like, "Great, we have insider ownership, but where are the activists? Are they here already? Will the company survive until they get here?"

    A few of my retail investments should have turned out worse than this situation but actually activists showed up and fixed things or took them private. I thought Abercrombie's CEO Mike Jeffries was turning into the CEO from Zoolander [1] but the activists managed to keep him from taking too many crazy pills.

    [1]. http://bit.ly/10bfOUO
    Nov 1, 2014. 11:34 AM | 1 Like Like |Link to Comment
  • Buy $1 For $0.50 And Own The Bombay Stock Exchange For Free With Urbana Corp. [View article]
    Given the ridiculous allocation to cash in my portfolio, it appears U.S. valuations are high. As always, I hope we get a 1929 repeat. I'd like to buy Urbana but I'm too greedy for 59 cent dollars.
    Oct 30, 2014. 07:25 PM | Likes Like |Link to Comment
  • Gold [View instapost]
    More asset forfeiture in the news:

    http://nyti.ms/1FQpWTw

    The key takeaway is to avoid 'smurfing' or 'structuring' which is criminal. But it seems that such transactions are easily done by accident by people not familiar with such laws, and then they have to litigate the IRS to get their checking accounts back. As Rebecca Black says, "Fun, fun, fun, fun!"
    Oct 27, 2014. 12:53 PM | Likes Like |Link to Comment
  • Xinyuan: The Company Of 10,000 Frustrations [View article]
    I hope you're right HerrX about TPG's motivations. I have trouble understanding what the management is doing since they are dramatically decreasing the value of their substantial stake in the company.
    Oct 19, 2014. 01:47 PM | 1 Like Like |Link to Comment
  • Xinyuan: The Company Of 10,000 Frustrations [View article]
    I agree completely with Brett.

    If this was a U.S. company that wasn't closely held I think it would already be taken over by activists, who would fire management, explore liquidation or sell-offs of different assets, or give a take-private bid. Perhaps the legal uncertainty of control of these Cayman Islands ADRs representing Chinese companies deters such activism.

    Good to keep in mind with future investments in developing countries.

    I'm surprised Yong Zhang and Yuyan Yang who own 39% of the shares don't have more alignment with their minority owners. I wouldn't be surprised if they do some lowball take-private offer if the share price remains depressed, say for $3-4.5.

    Hope this situation goes well for everyone. Diversity those cigar-butts.
    Oct 17, 2014. 05:42 PM | 1 Like Like |Link to Comment
  • Bitcoin Discussion Forum [View instapost]
    A Bitcoin arbitration service that is interesting -- Bitrated. I think it's too complicated for mass adoption but still cool. In my opinion arbitration would work best if it were integrated directly into exchanges such as Coinbase.
    https://www.bitrated.com
    Oct 16, 2014. 10:49 PM | Likes Like |Link to Comment
  • Systemic Risk Forum [View instapost]
    One topic I'm interested in is off-grid refrigeration.

    This is the most efficient electrically-powered fridge that I am aware of:
    http://bit.ly/1u0ZIF5
    It is about 10-20 times more energy efficient than most fridges, using 0.1 kWh/day.

    For non-powered refrigeration, most of the large coolers I've found are not vacuum insulated. Probably one could build a decent cooler by removing the foam from a regular cooler and replacing it with vacuum insulated panels used for housing insulation. Then one could place vacuum-insulated large food jars inside to keep cool for an additional duration.
    Oct 14, 2014. 01:30 PM | 2 Likes Like |Link to Comment
  • Pointer Telocation: Severe Mispricing Points To 75%+ Upside Over Next 12 Months [View article]
    Great first article.
    Oct 9, 2014. 05:14 PM | 1 Like Like |Link to Comment
  • Quartet Merger Rights: 40% Upside For A Short-Term Event Driven Investment [View article]
    I have found it always helps me to understand the business event probabilities and the associated intrinsic values myself. As soon as I delegate analysis, Murphy's law causes the business to fall into some weird unforeseen hole that I didn't anticipate because of not understanding it thoroughly. And then I have to do the analysis myself to figure out whether to buy or sell.
    Oct 8, 2014. 07:33 PM | 1 Like Like |Link to Comment
COMMENTS STATS
337 Comments
105 Likes