WC Whiner

http://www.bignose.org/blog/

75 Comments

    • Chipotle Mexican Grill: A Close Look [view article]
      Good note on the 'B' shares.

      Decent analysis overall. CMG's product may be a pale, flavorless and overpriced equivalent of my local burrito smorgasboard, but east of the Rockies, that may well be enough. One note: Mexican food is eaten by Mexicans in Mexico. The burrito is American, like Chow Mein and the fortune cookie. Call it 'Tex-Mex' or more accurately, 'Southwestern', since the US Southwest is where it's at home.

      If Rubio's had CMG's management, I'd bet on their concept first. As they don't, betting on the old MCD hands may work out okay.

      FD: no position, long or short       Feb 03 02:49 AM
    • Cornerstone CEFs: What's In A Return? [view article]
      CRF and CLM have a new competitor in the insensate-premium sweepstakes: CUBA. Traders have been pushing the reflexive buy button on rumors of Castro's demise. That stalwart fund was at an +85% premium yesterday and is up another 10% today, while CRF was at 94% on 12. Jan. and has come down 5% since. CUBA also eats over 300 bps a year in fees, while CRF takes "only" 150.

      FD: no position in CUBA (I can't get shares to short), short CRF, short CLM

      Crossposted to the original blogs.marketwatch.com/...       Jan 17 02:13 PM
    • So What If GM Relies On Overseas Markets? [view article]
      If GM files bankruptcy, the UAW and the bondholders will fight over the corporate carcass. I think neither the union nor management want that, but management wants it less, since that wipes the board clean and top management probably all get fired. The union can fight with bondholders with the company's benefit and retirement obligations, which supersede even the most senior bank debt.

      When UAL went into bankruptcy in 1994, the union actually played white knight and saved it from the bondholders. When it declared bankruptcy again a couple years back, it wiped out the ESOP that had saved management before. No union with half a brain and any sense of realpolitik will play white knight for management again, and the UAW is nothing if not cognizant of its power and limitations.

      Don't think bankruptcy is Wagoner's trump card -- it's the UAW's.

      FD: short GM

      crossposted to controlledgreed       Jan 07 12:50 PM
    • Intel Speeds Ahead of Advanced Micro Devices [view article]
      Er, what? My wife is a pop-culture addict, so I get a good sample. In a given week I see 0 AMD commercials on the teevee, versus maybe 10 INTC (mostly those nifty Core dancers).

      There is that one AMD billboard down the 101 South, and a few bus-stop posters, but on television I see nothing of theirs at all.

      I don't know what you're watching. What am I missing?       Jan 04 08:24 PM
    • Cara's Stock of the Year for 2007: Crystallex [view article]
      "Stock of the year"? I love me a junior gold now and then, and I salute you for the courage of making the prediction. I think you might even make a little scratch in US$ terms, since I think pressures on the dollar aren't about to relent.

      That said, if I were to buy a single junior rather than a basket (and I don't see the point of not diversifying), it would probably be Greystar instead. Doing business in Columbia is no picnic, I grant, and GSL's deposit is at best half the size of Las Cristinas. However, there is essentially zero "Bolivarian" risk, and GSL's market cap is one-third of KRY's, which has outperformed by ~50% the last couple months.

      Risk matters, as does valuation.

      Crossposted to billcara.       Jan 04 12:15 AM
    • Intel Speeds Ahead of Advanced Micro Devices [view article]
      Me, I don't see the big Vista bump. I look at the economic data, which so far indeed point to a soft landing, and don't like a naked long in anything as leveraged to consumption as INTC. Turn this into a paired trade where you short AMD or at least a basket of other techs you dislike (UMC at $3.50? I've been selling, too), and I'm there with you.

      Crossposted to rawgreed.       Jan 01 01:32 PM
    • Molson Coors: Like Watching Beer Dry [view article]
      On the other hand, the only one of the world's top three brewers you've beaten since your purchase is Anheuser. SABMiller beat Molson-Coors over that period by ~1000 bps, and InBev.. well, it's almost embarrassing how much better InBev stock has done than the rest, and I say this with chagrin as a longtime SAB long (you'll pity me less if you look at the five-year chart, but a mistake is a mistake is a mistake).

      Don't get me wrong, it was a nice call for a US-only mandate, since SAB and InBev are listed in London and Brussels, respectively. Beating BUD is outperformance, for which congratulations. Still, your profit isn't company specific if the whole sector moves, and it did.

      Cf bigcharts.marketwatch....;symb=tap&comp...

      Crossposted to your site.       Dec 30 01:14 PM
    • Merrill: Short SanDisk Due To NAND Oversupply [view article]
      Er, what? Vista requires flash?

      I'll assume that was your shorthand for hybrid drives in Vista laptops and eventual USB-flash RAM upgrade. The latter is an upgrade market, so it won't bite in 2007. It is my estimate that the former comes nowhere near the expected hole between capacity and demand in CY2007, but I would love to see your models if you're willing to post.       Nov 30 04:30 PM
    • Merrill: Short SanDisk Due To NAND Oversupply [view article]
      Merrill is right on oversupply. Check out what's being rebated and discounted. SNDK-style products are prominent among them, and that's before increased production capacity hits next year.

      As for the stock price, we'll see. I am short, but then I've been short since before the earnings announcement that tanked SNDK in the first place. Cf chip.seekingalpha.com/... That post was at $50, so I've tacked on 15% just holding the short I entered at ~$60. I can give those 15% back if I missed something and still be happy, though that will have been an error should it occur.

      Time tells, as ever.       Nov 29 04:41 PM
    • H&Q Life Science: Hold On, Its Time Is Coming [view article]
      I gave you a 1, and you deserve it.

      One, unlike your interlocutor AI, you fail to mention that a fixed payout can lead to return-of-capital. When a closed-end fund returns capital, that is no longer a "dividend". You're just getting your own money back. You don't pay tax on it (nor should you -- imagine paying ordinary income tax on every bank withdrawal). All it does is reduce the fund's assets under management, as it is forced to sell holdings to return capital to investors. This is not, normally, a good thing. However, though I am almost loathe to note it, fixed-payout policies can have one salutary effect. Braindead yield buyers have a nasty tendency to start investing in them as if they were bonds whose "yield" were an actual coupon. The result can be rather preposterous premiums to NAV (cf CRF). A cynic might buy into any closed-end fund trading at a discount with a fixed-payout policy and hope that a few among them fall prey to this affliction.

      Two, you do not mention fees. HQL charges 167 bps, vs BBH's 70 and IBB's 50 bps.

      Now, I *like* HQL and its sister fund, HQH. At times I have used them for exposure, especially when they had double-digit discounts and I felt biotechs were unloved an potentially due for runs. I can even see investing in the hopes of being bailed out by the braindead yield constituency. However, to recommend them as serious investment vehicles over their alternatives without mentioning fees or the phrase "return of capital" strikes me as irresponsible, at best.       Nov 17 01:47 AM
    • Cisco's Stock Buybacks - Enough Already [view article]
      Buybacks are tax-advantaged dividends. Your complaint, to my mind, would better be directed at Cisco's dilutive compensation practices. Nov 16 12:56 PM
    • International Securities Exchange Launches Natural Gas Index [view article]
      Who needs an ETF?

      Buy at-the-money calls. Sell at-the-money puts. Voila, you are long index futures. Index futures are like an ETF, except better. One, you don't pay fees, aside from commissions (and the ISE tightens markets like nobody's business). Two, you conserve margin, meaning you get favorable (implied) financing and even make interest on any cash balance you hold, as long as your broker doesn't suck. Three, at cocktail parties, you get to tell strangers that you have a synthetic long futures position in an index.

      ETFs are great when you can buy VTI for 7 bps. Something like this I guarantee will charge you 40, at which point there is no reason to own it.       Nov 08 07:31 PM
    • Housing Sector Recession Will Last a While, Won't Cause Full Blown Recession [view article]
      Say mortgage equity withdrawal ceases. The former was providing ~$1 trillion a year, of which between half (Greenspan's guess) and two-thirds (Goldman Sachs) went to consumption. Then to keep production growing you would need to replace a half trillion US$ in consumption. Energy expenditures went from ~7% to ~9% of GDP from 2001 to 2006. If that reverses, at $13 trillion GDP the energy dividend replaces perhaps half the lost consumption. Even in a $13 trillion economy, you'll notice.

      I agree with your moderate stance; just as adding mortgage equity withdrawals didn't overheat the economy the last few years, ceasing them need not overcool it. However, it seems likely that it will act as a drag on production for a while.       Oct 30 03:29 PM
    • Deflating Housing Bubble = Comfy Landing for Equities [view article]
      If you want to see owner-occupied vacancies only, I have a chart at www.bignose.org/blog/i... The numbers are lower than you think; there are ~2M for-sale-only vacancies, but that's up from 1.6M just two quarters back. That's a half-million homes that either have to be priced to sell or that will absorb mortgage payments for a while. The former drives down residential housing, the latter drives down consumption. Not a single owner need default to affect production.

      For historical US MEW data, click through to photos1.blogger.com/he...
      The numbers are pretty darned big. If MEW has been running at ~$1 trillion a year, and if half that has been going into consumption, then flat housing and rates are going to chop a half-trillion US$ off consumption, again affecting production.

      Builders are going to have to discount to move inventory, but the -10% YoY is misleading. Prices haven't dropped much yet, but the sales mix changed drastically in the last year, with about 5% less share for the West and 5% more for the South.

      I do have a few less bearish notes, mind you. I do not see catastrophe. For one thing, Social Security doesn't even have a problem with decent productivity or just a little immigration. It'll be 2040 or '50 before there is an issue even if neither materializes. Medical care is an issue, but it isn't an unfunded liability either -- we can change the laws any time. The only question is how much of future production we spend on it. As with retirement, that's a problem that takes care of itself on the societal level.

      The US, in short, is not GM.       Oct 30 12:38 PM
    • Deflating Housing Bubble = Comfy Landing for Equities [view article]
      You're looking at the wrong thing by focusing on prices and units. Check out vacancy rates and mortgage equity withdrawal. Despite the '70s build, total vacancy rates never got much higher than 3% and there was little MEW. Currently, vacancy is 5%, and 2001-2006 MEW as percentage of GDP dwarfs 1985-1990, to the previous peak.

      The '70s build saw subsequent real housing prices drop ~1% a year from '79-'84. Late '80s equity withdrawals were followed by a drop in real housing prices of ~2% a year from '90-'94. Correlation is not causation, but if past is prologue, housing will flatten (or even drop) in nominal terms and sink in real terms.

      I would not be shocked if in that environment equities continue to perform. During both previous housing corrections, the S&P did ~5% better than cash. Of course, between those corrections and since '95, it gave you ~10% over bills.       Oct 29 01:38 PM
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