Coca-Cola: How Safe Is The Dividend? [View article]
Good analysis - but should have taken account of what the true business reinvestment needs are relative to investing cash flows that occurred because of excess liquid resources.
The argument is sound, but the premise that "Investing cash flows = business reinvestment needs" is false.
Still - good to see high integrity analysis on SA - usually it is just some muppets beating their biased drums...
A Much Better Alternative For Cyprus [View article]
You do understand the time value of money? Like - EUR100 in 5 years time is worth less than EUR100 today? Yes? Makes sense? So you'd be taxing depositors anyway by "terming them out". The whole bail in idea is nonsense and an undermining of property rights and banking sector confidence. If i put my money in a bank on certain terms then that bank should respect those terms - it is not for them to decide to buy shares in themselves with my money or arbritrarily decide when to give it back to me. Your solution is as morally objectionable as the taxation of depositors.
Statistical abberation. In a population of investors at a given confidence level a certain number of them will outperform.
Agree with your short thesis.
Did you read the section on insurance in his letter - the part where he says that premia recieved are an over-stated liability because in fact if you can screw your customers hard enough you never actually have to give them back that money. I wonder how the various victims of poorly compensated insured losses feel about multi gazzillionaires crowing about how to generate super-profits by charging people loads for insurance and then not paying them enough when they need compensation.
It is because of Democracy. Universal Suffrage only occurred late in the evolution of Western Democracy - but then it has been shoved down the throats of developing nations. Also the U.N. allows zombie nations to live. Pre the formation of the UN if a country had broken government, it would be overcome by a stronger nation and rectified. In a post WW2 world, corrupt opportunists can persist indefinitely provided they can fool and bully the masses into voting for them (Zimbabwe, Venezuela, South Africa, Argentina, Vietnam, North Korea etc etc etc).
The US per capita GDP is 49 800 - 90% of the US'. Do you think the US is 90% of the way to achieving a similar level of egalitarianism between citizens? No - of course not - because US Capitalists have taken what was once the greatest vision of political and economic freedom - being the promise of the new world - and turned it into a narrative that has seen Capital hog all productivity gains since WW2 while workers have suffered declining real wages. Then the Capitalists have the biggest whine in the history of baseless whining when you get a principled President who is willing to stand up for what is right on behalf of the people.
Europe: Was (Is) It Worth The Trouble? [View article]
Outstanding analysis. Could not agree more. Look at VOW's guidance numbers from two days ago - totally reflects this thesis. The ex-Europe operations are doing relatively well (notably US & China), while the outlook for European EBIT looks very negative through 1H13. If the world economy rolls over, demand for Audi's and Porsche's (origin of the outstanding volume performance through FY "what crisis" 12) will roll over along with it. It is like a microcosim of what you are saying. The thing is that after the beta rally of the last few months (along with happy FX returns), if the 1H earnings season fails the expectations of the latest optimists, is hat going to leave the market vulnerable. Precarious.
Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
Fair enough James - but what about in the instance where corporates de-lever and redeem bonds? There must be a net change in the cash in the system creating a price sensitivity to the asset allocaiton decision.
Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
James
An instructive article although you may be splitting hairs here. If on average Japanese pension fund managers are holding 75% bonds and 35% equities, and they then decide to change that asset allocation decision to say 50% of each, there will be an aggregate increase in the amount of cash seeking a home in equities. To the extent that there are no new equity issues, that increase will of necessity be reflected in an increase in the capitalisation of equities. Now you explain that as a change in liquidity preference; it may as well be explained as a contraction in the equity risk premium, or even just a consequence of the Japanese central bank manipulating incentives through an inflation targetting policy - or all three.
Furthermore, if you are in a market where there are growing an captive local cash flows entering the asset management system (Chile, New Zealand), the empirical evidence suggests that local equities trade at persistent premia in consequence of the fact that there is simply more cash trying to find a home in the same number of shares.
I think your aricle makes some very insightful points, and should probably be reconstructed around a modified conclusion.
Why Apple Should Ignore Its Shareholders [View article]
I reckon the plural of "ignoramus" is "ignorami".
You are quite right that bulls and bears assemble cases built on vision rather than analysis. This is not limited to Apple, but rather ubiquitous. The reason for this is the MBA which forms the rite of passage for so many people into the markets. The MBA teaches people to think along strategic lines, and does not equip them with the skills to convert strategic ideas into investment theses. While quite surprising for me as I declined multiple MBA candidates for a position in our fund, it is also quite useful for me in terms of making money in the markets. So I encourage it.
Deep Dive Analysis Of Rackspace's Q3 [View article]
Insightful analysis Lanette.
Another thing that is strange is the change in reporting from 2Q11. Why would they change the disclosure from "Managed Services" to "Private Cloud" and then stop giving the server number data? It is always negative when a company changes reporting and gives investors less information.
That said, if they truly make decisions based on a positive EVA spread, then they have the combined benefit of being a leader in a very fast growing sector. The only issue is that looking at the EQIX experience to date, this does not necessarily translate into economic value - Equinix themselves are struggling to get the ROCE to something above 6%. Ok - different business model - but still...
Apple Earnings Preview: Can Shares Rebound? [View article]
Great analysis. Thanks for sharing.
I think given the spate of sell-side cuts ahead of the result that we must be looking at a miss. Point is that at $500 the market has already priced this and the sell-side is just catching up.
The big deal is that the company needs to expand to adjacent markets. Success in this event is not obvious, particularly as the most obvious move is to come down the price curve to access EM consumers. Company needs to reinvent itself - and that it is the story.
Facebook Handled Its IPO Exactly Right [View article]
Well to the extent that a company does not need the goodwill of its investors this argument makes sense. Hyping up the strength of the book does give the capital markets a false sense of appetite, and appetite drives risk premia which is a key input in pricing. So it si lying to manipulate the price. In my mind that is beyond the gambit of achieving the best cost of capital for the company.
Gold Mining Stocks: Badly Managed But Bombed Out [View article]
Agree with Jason C.
Also it is normal for derating to occur as earnings reach cyclical peaks - it does not reflect changing investor appetite at all.
Also the gold price is driven by a multitude of factors, not the least of which is the cost of getting it out of the ground (4km deep in many places) - hence the price does not necessarily tellyou anything about margins.
Capex is pro-cyclical, so fixed asset investment peaks with high operating cash flow generation.
It is like a data centre, except that it sometimes shows economic profit....
Coca-Cola: How Safe Is The Dividend? [View article]
The argument is sound, but the premise that "Investing cash flows = business reinvestment needs" is false.
Still - good to see high integrity analysis on SA - usually it is just some muppets beating their biased drums...
A Much Better Alternative For Cyprus [View article]
Berkshire Hathaway Is A Sell [View article]
Agree with your short thesis.
Did you read the section on insurance in his letter - the part where he says that premia recieved are an over-stated liability because in fact if you can screw your customers hard enough you never actually have to give them back that money. I wonder how the various victims of poorly compensated insured losses feel about multi gazzillionaires crowing about how to generate super-profits by charging people loads for insurance and then not paying them enough when they need compensation.
Agree with your SHORT on moral grounds!
Why Argentina Will Default In 2013 [View article]
Why Argentina Will Default In 2013 [View article]
Why Apple's P/E Multiple Is An Anomaly [View article]
What do they teach you all in those fancy MBA classes?
Europe: Was (Is) It Worth The Trouble? [View article]
Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
An instructive article although you may be splitting hairs here. If on average Japanese pension fund managers are holding 75% bonds and 35% equities, and they then decide to change that asset allocation decision to say 50% of each, there will be an aggregate increase in the amount of cash seeking a home in equities. To the extent that there are no new equity issues, that increase will of necessity be reflected in an increase in the capitalisation of equities. Now you explain that as a change in liquidity preference; it may as well be explained as a contraction in the equity risk premium, or even just a consequence of the Japanese central bank manipulating incentives through an inflation targetting policy - or all three.
Furthermore, if you are in a market where there are growing an captive local cash flows entering the asset management system (Chile, New Zealand), the empirical evidence suggests that local equities trade at persistent premia in consequence of the fact that there is simply more cash trying to find a home in the same number of shares.
I think your aricle makes some very insightful points, and should probably be reconstructed around a modified conclusion.
Why Apple Should Ignore Its Shareholders [View article]
You are quite right that bulls and bears assemble cases built on vision rather than analysis. This is not limited to Apple, but rather ubiquitous. The reason for this is the MBA which forms the rite of passage for so many people into the markets. The MBA teaches people to think along strategic lines, and does not equip them with the skills to convert strategic ideas into investment theses. While quite surprising for me as I declined multiple MBA candidates for a position in our fund, it is also quite useful for me in terms of making money in the markets. So I encourage it.
Apple's Growth Story Is Over [View article]
Deep Dive Analysis Of Rackspace's Q3 [View article]
Another thing that is strange is the change in reporting from 2Q11. Why would they change the disclosure from "Managed Services" to "Private Cloud" and then stop giving the server number data? It is always negative when a company changes reporting and gives investors less information.
That said, if they truly make decisions based on a positive EVA spread, then they have the combined benefit of being a leader in a very fast growing sector. The only issue is that looking at the EQIX experience to date, this does not necessarily translate into economic value - Equinix themselves are struggling to get the ROCE to something above 6%. Ok - different business model - but still...
Apple Earnings Preview: Can Shares Rebound? [View article]
I think given the spate of sell-side cuts ahead of the result that we must be looking at a miss. Point is that at $500 the market has already priced this and the sell-side is just catching up.
The big deal is that the company needs to expand to adjacent markets. Success in this event is not obvious, particularly as the most obvious move is to come down the price curve to access EM consumers. Company needs to reinvent itself - and that it is the story.
Facebook Handled Its IPO Exactly Right [View article]
Gold Mining Stocks: Badly Managed But Bombed Out [View article]
Also it is normal for derating to occur as earnings reach cyclical peaks - it does not reflect changing investor appetite at all.
Also the gold price is driven by a multitude of factors, not the least of which is the cost of getting it out of the ground (4km deep in many places) - hence the price does not necessarily tellyou anything about margins.
Capex is pro-cyclical, so fixed asset investment peaks with high operating cash flow generation.
It is like a data centre, except that it sometimes shows economic profit....