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GaltMachine

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  • Valuentum's Outlook For The Market [View article]
    UI,

    I agree with both points.

    On point 1, with ZIRP this could continue indefinitely and the perverse incentive this creates for management means it will continue.

    On point 2, James Montier of GMO did a really good analysis of this issue that is well worth the read. I suspect you have already read it but in general, the monetary flows of the overall economy are an accounting identity and therefore deficit spending has to show up somewhere and in this case it appears that corporate margins have benefited disproportionately. However with recent fiscal "tightening" (as in incremental growth of deficits) this could become a negative drag for margins which may explain why earnings' growth has slowed noticeably.

    Link to the Montier piece:
    http://bit.ly/RajFte
    Aug 19 12:53 PM | Likes Like |Link to Comment
  • Why low volume actually is bullish, according to Ryan Detrick: Total-dollar volume is higher now than in the 2003-07 bull market, so how can bears say lower share volume is bearish? "As long as volume stays low and bears use it as ammunition for lower prices, just smile and nod your head, knowing this isn't true." [View news story]
    Here's the conclusion to the piece:

    "In conclusion, does stock volume matter? A few years ago, I would have said absolutely. Now, after this study, I'm not so sure. Nonetheless, the results speak for themselves."

    I defy anyone to try to draw any possible actionable information from this "analysis".
    Aug 18 11:34 AM | 4 Likes Like |Link to Comment
  • July Leading Indicators: Leading Index +0.4% to 95.8 vs. +0.2% expected, -0.3% prior. Coincident Index +0.3% vs. +0.2% prior. Lagging Index +0.4% vs. +0.2% prior. [View news story]
    Big improvement from June reversing the negative trend of the prior 3 months. Slow growth but hard to see recession here in the short-run.

    Perhaps this really does take QE3 off the table.
    Aug 17 10:10 AM | Likes Like |Link to Comment
  • Valuentum's Outlook For The Market [View article]
    "And while bottom-line expansion hasn't been entirely driven by sales growth (only about 43% of companies that have reported second quarter results exceeded top-line consensus) and third-quarter earnings may face some material headwinds (namely from foreign exchange and higher input prices from the drought in the US), we continue to think the domestic economic backdrop is encouraging (even if it may not be robust)."

    That seems like the most accurate piece of this analysis and it makes sense. Why wouldn't stocks pull back regardless of the path of the economy if this is true?

    This weak performance in top-line results came after all the downward revisions in estimates prior to the quarter's inception so in some ways it is even worse.

    This market is running on momo juiced by algos and the rise of the machines :)
    Aug 16 10:30 PM | 1 Like Like |Link to Comment
  • Groupon (GRPN -27%) had its defenders on this dark day. Barrington praised Groupon's market share and brand, and estimates it trades at just a 7.1x 2012 EV/free cash flow multiple. And SA's Drew Handy is impressed with the rapid growth of Groupon's e-commerce business. Critics, meanwhile, focused not only on slowing growth, but also Groupon's people issues. Namely, that it may have too many, and is having problems managing them. (more) (transcript[View news story]
    SA,

    You think GRPN is one of those "different types of companies deserve different types of P/S ratios"?

    I don't. I think its a dog.

    There are literally thousands of companies worldwide that are more interesting and offer a better ROI. No reason at all to settle for a company that relies upon complex accounting methodology and revenue recognition policies to explain its business.
    Aug 15 06:16 PM | Likes Like |Link to Comment
  • Groupon (GRPN -27%) had its defenders on this dark day. Barrington praised Groupon's market share and brand, and estimates it trades at just a 7.1x 2012 EV/free cash flow multiple. And SA's Drew Handy is impressed with the rapid growth of Groupon's e-commerce business. Critics, meanwhile, focused not only on slowing growth, but also Groupon's people issues. Namely, that it may have too many, and is having problems managing them. (more) (transcript[View news story]
    SA,

    It does no such thing - you do not ignore the things you mentioned. You start with PSR and if it doesn't pass that screen, it is very likely not a "Super Stock" as defined by Fisher. The link I provided also addresses those other ratios that cover capex, R&D, etc. and it fails all of those tests as well.

    The purpose of using PSR is to force discipline on your investing process and to stop you from buying crap like GRPN in the first place. You focus on stocks that meet the PSR criteria and then do further fundamental analysis as you suggest.

    I recommend the book "Super Stocks" as it is a very worthwhile and profitable read.

    Why analyze a pig when you can analyze a star?
    Aug 15 10:56 AM | Likes Like |Link to Comment
  • Groupon (GRPN -27%) had its defenders on this dark day. Barrington praised Groupon's market share and brand, and estimates it trades at just a 7.1x 2012 EV/free cash flow multiple. And SA's Drew Handy is impressed with the rapid growth of Groupon's e-commerce business. Critics, meanwhile, focused not only on slowing growth, but also Groupon's people issues. Namely, that it may have too many, and is having problems managing them. (more) (transcript[View news story]
    This thing was a dog in valuation terms from the day of its IPO no matter what standard you use. I like Fisher's Price to Sales Ratio because you can't fake it with phony/aggressive accounting and on this metric it is still way overvalued.

    The PSR has fallen like a rock and until it reaches 1.5 or less, I wouldn't touch this with a 10 foot pole. This was a pure pump and dump play and the results prove it.

    FCF analysis depends upon the validity of the financial statements, a confidence I wouldn't place in this company.

    Fisher ratios:
    http://bit.ly/NyY1hB

    It's not a company, it's a gimmick.
    Aug 14 11:01 PM | Likes Like |Link to Comment
  • Groupon (GRPN -27%) had its defenders on this dark day. Barrington praised Groupon's market share and brand, and estimates it trades at just a 7.1x 2012 EV/free cash flow multiple. And SA's Drew Handy is impressed with the rapid growth of Groupon's e-commerce business. Critics, meanwhile, focused not only on slowing growth, but also Groupon's people issues. Namely, that it may have too many, and is having problems managing them. (more) (transcript[View news story]
    You know a company is a POS when you have to invent some type of metric to make it sound good.
    Aug 14 09:38 PM | 2 Likes Like |Link to Comment
  • July Retail Sales: +0.8% vs. +0.2% expected, -0.7% prior (revised from -0.5%). Ex-autos +0.8% vs. +0.3% exepcted, -0.8% prior (revised down from -0.4%). [View news story]
    Looking at the press release, averaging the last 3-4 months gives you a better sense of the numbers because those negative revisions were huge. Big drop from May's peak to the current level on the unadjusted data and flat with the adjusted data. That's flat at best on a month to month basis - y/y over year positive.

    Still tepid but obviously a growth month is needed to reverse the current trend.
    Aug 14 09:25 AM | Likes Like |Link to Comment
  • Hedge funds capitulate, with data suggesting they are covering shorts on European stocks at the fastest rate since the epic bottom of early 2009. Likely priced in on the bear side are faltering economies and shrinking corporate profits. Maybe priced in on the bull side are further supportive official actions. [View news story]
    Not sure how anyone in their right mind can possibly be shorting a market that can turn on a dime with just a couple of well-chosen words, not actions mind you, from a central banker.

    I just think that the destruction of the shorts is going to lead to even greater instability in the long run and the potential for sharp crash without the support from shorts covering their positions on the downside.

    Add in short-selling bans and you really have to wonder about the basic premise of running a long/short fund. The only rationale is really the fees because the clients sure aren't benefiting from it.
    Aug 13 12:37 PM | 1 Like Like |Link to Comment
  • Salesforce.com (CRM +2.2%) is trading higher after Piper reports the company has scored the largest deal in its history, one that surpasses a $140M contract with State Farm. The firm thinks other huge deals could be on the way. Salesforce, which talked up the size of its deal pipeline 3 months ago, delivers its FQ2 report on Aug. 23. [View news story]
    Big admirer of the company but I can't get over that price to sales ratio valuation.
    Aug 13 10:58 AM | 1 Like Like |Link to Comment
  • A Citic Securities - China's largest brokerage -  spokesperson takes to CNBC to deny rumors of a $460M loss on overseas trading as well as the arrest of the Chairman. Citic plunged 9.1% overnight, taking other brokerage firms along for the ride. [View news story]
    "takes to CNBC to deny rumors of a $460 loss on overseas trading"

    Something tells me that there is a dollar amount (millions perhaps) that is missing from this story :)
    Aug 13 10:09 AM | 1 Like Like |Link to Comment
  • The NYT's Catherine Rampell investigates whether the recovery really is the worst since the Great Depression and finds that on almost every measure she looked at, "there was at least one previous (completed) recovery that performed worse." However, improvements across different metrics are way below the average. [View news story]
    DV,

    Who is the top Presidential candidate in terms of fundraising from the Wallstreet elite that you are disparaging?

    Barack Obama by a country mile.

    http://bit.ly/nnhtuS

    Perhaps this explains why Wallstreet has done so well under this President and no one has gone to jail.

    How about that Jon Corzine guy?

    The fact that he is such a fundraising champion for the President might explain why he isn't in jail right now.

    Too bad you don't use the same standards on your own candidates.
    Aug 12 12:29 PM | 5 Likes Like |Link to Comment
  • An Equity Quicksand Or A Bond Cliff? [View article]
    Paul,

    "you can't buy past performance"

    Well you can say the same thing about stocks.

    Assuming you bought bonds/bond funds systematically over the current cycle you are ahead and the decision is whether to sell or hold.

    I personally have significant gains on my holdings.

    Would I add new money at this point?

    Nope. I think I would rather stick it in cash and wait for an entry point in some other asset class.

    I also think ZIRP has made everything overvalued including stocks and that might be where we differ.
    Aug 12 12:23 PM | 3 Likes Like |Link to Comment
  • Recession's Key Ingredient Added [View article]
    Freddy,

    "There hasn't even been a single monthly contraction since mid-2009."

    You might want to doublecheck that statement. In the latest GDP revisions, Q1 2011 was revised down to 0.08% GDP growth. I suspect that one of those months must have had negative growth but I am not sure how to check that.

    Now that revision is a laugher. How much do you want to bet it was actually negative and they decided to add that little bit to avoid the truth?
    Aug 12 12:12 PM | Likes Like |Link to Comment
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