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BeenAroundTooLong

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  • 5 Russell 3000 Top Dividend Yielders - Are They Bargain Stocks Now? [View article]
    Nice timing on the MSB call - the very day before they announced the dividend and the stock dropped - so far - 7%. ;-)
    Jan 16 01:37 PM | Likes Like |Link to Comment
  • Stocks: The Danger Lurking After A Fiscal Cliff Deal Is Reached [View article]
    Sm -

    Yes, our debt is huge. But, fortunately or not, it's also dollar denominated. What will the government do to get out from under? Accept a black economy? (Not that I disagree with you, but many don't have anything worthwhile to barter)

    Inflate it away, I believe. Pay off those pesky bonds with money at a 10? 20? 30? 50%? discounted rate? Why not? They can - and are already talking about - "recalculating" the SS benefits. (But 1 gets you 5 that US government pensions get indexed to a real inflation rate.)

    Ah, well. "When buying and selling are controlled by legislation, the first things to be bought and sold are legislators" - P.J. O'Rourke.
    Dec 6 08:00 PM | 1 Like Like |Link to Comment
  • For Rackspace, It's Time To Fold 'Em [View article]
    I agree the technical people at RAX are superb. But it's easy to start with great technical expertise and still wreck your business.

    "Gotta make budget this year, so no hardware upgrades and cut back on the training"... and the best people start walking out the door. (Been there, seen that)

    The opposite happens as well - a hot new technology comes out, everybody gets wildly enthusiastic, implements it prematurely, tests it incompletely (the Really Big Mistake), and it doesn't work. Mad scramble to rebuild the "old" technology, angry and frustrated customers, extremely irate owners, colleagues and CEO. (Been there, Done that -sigh- )

    And all too often, the people who have the technical expertise are managed by people who don't, yet who over-ride their recommendations anyway. (Because otherwise what use is the manager?) This is disheartening, morale plummets, taking service, responsiveness, innovation etc. with it. If you take some really good technical people and make them managers, you've just lost some really good technical people and added some (all too often) mediocre managers.

    Running a technical group is one of the most difficult and thankless jobs around. Being a technical expert is much more satisfying and, dare I say it, easier.

    Finding middle and upper level managers who can get those with technical expertise to focus on customers, solving their problems, explaining alternatives; instead of falling in love with tech-for-tech's-sake or seeing customers as a distraction: That's hard.
    Jun 22 11:07 AM | Likes Like |Link to Comment
  • For Rackspace, It's Time To Fold 'Em [View article]
    That is a very perceptive comment. Still, if cash is the problem, the markets should (a kowtow and a brief pull of the forelock to the efficient market hypothesis) be supplying it. Why Rackspace doesn't issue new stock and/or leverage itself up to the hilt and beyond... I don't know.

    They are really much better - now - than any of their competitors I have encountered.

    OpenStack is open source - that should, if anything, make management expertise more valuable. Taking away the bulwark of proprietary - i.e. defensible - software leaves one with an advantage limited to "who can use it to serve their customers?". Wall Street devalues management as a factor (probably because most I-Bankers have never managed anything more complex than their Porsche leases) and it leads to, well, disaster.
    Jun 21 08:54 PM | Likes Like |Link to Comment
  • For Rackspace, It's Time To Fold 'Em [View article]
    While I cannot disagree with your main conclusion, that RAX is under pressure to sell and probably will, there is a fundamental issue that Wall Street never, IMHO, takes into account. Rackspace is a joy to work with. I have used several (four, to be precise) storage and server providers and RAX was head and shoulders above them in service, quality, speed, expertise and reliability.

    That's a function of management, the people they hire, and the values they inculcate. No, it is not a theoretically defensible or sustainable competitive advantage - speaking as an ex-strategy consultant (mea culpa, mea culpa, mea maxima culpa) - but it is fiendishly hard to reproduce in practice; and harder still if you have to change an existing large company's practices. I've never seen it done. Reproduced, starting with a clean slate, yes. But "starting with a clean slate" means that you are not coming in as a big player by definition.

    And Whitman... nah. Even if she bought it, she'd be unable to keep HP from interfering and destroying the only justification for the acquisition. Doesn't mean HP wouldn't buy it, of course. Big corporation CEOs are not noted for their clear understanding of their own foibles, quirks and failings, nor for learning from their mistakes. ("Mistakes? Moi? Aucun!") Exempt Richard Branson and Bill Gore from that last sweeping condemnation.

    Most acquisitions subtract value, if you examine the evidence. Synergy? Bah. Complementary? Humbug. It almost never works out that way. Maybe the proverbial whale swallowing a tiny shrimp to grab a particular technology... sometimes. But generally, no.

    Acquisitions are too frequently driven by CEO ego (vide Weston vs Dell, above), or too much cash burning holes in the corporate pocket ("dividend? stock buyback? What language is that, Esperanto?"), or because it's more fun to say "We're an $(X+Y) bn company" than to say "We're an $X bn company". Or maybe those fiendish I-Bankers get inside their heads and convince them that they can be the canniest deal makers since James Hanson and Gordon White.
    Jun 20 05:34 PM | 1 Like Like |Link to Comment
  • Jesus, Bob Dylan And Expected Returns: 8 Indicators Of Long-Term Equity Returns [View article]
    Bard -

    Thank you for your thorough and complete answer. It's good to see someone who knows the uses and abuses of regression analysis.

    You and I will agree to disagree on the 1890 vs 1971 time period, although I confess I have not analyzed the periods independently. To be rigorous, I should check 1890 to 1971 and see how it fits as a predictor of returns compared to the 1971 - present, and look at subsets within the period as well. But I'm basically lazy.

    For my own use, I restate the CAPE to the shorter time period, and use that for my estimation of whether the market is relatively cheap or expensive. I agree with most of the random walk theory (my graduate work was at a hotbed of financial fundamentalists and they'd proclaim a fatwa for heresy if I disagreed), so I don't try to "time the market". Not in periods shorter than a year, at least.

    On the other hand, I also agree with my father's advice from long ago: "It's better to buy things when they're cheap." He was consistently successful in land, metals, equities, and cars. Okay, "cars" because he loved the Citroen "D" series, and was the only person within 200 miles who could repair one. But he made a profit on his hobby, too.

    Right now, I believe the market is not ridiculously expensive, like 1999-2000... but neither is it dirt cheap like early 2009. So I'm positioned right where your article recommends, and sleeping well at night.
    Jun 16 12:17 PM | 2 Likes Like |Link to Comment
  • Jesus, Bob Dylan And Expected Returns: 8 Indicators Of Long-Term Equity Returns [View article]
    You put a great deal of thought and work into this article, and I thank you for sharing it. I do have two comments and two questions, however.

    First, the R squared numbers are underwhelming, as they usually are in business and financial analysis. The significance level at which the null hypothesis could be rejected would have been helpful. It's clear that it isn't 99%. (smile)

    Second, going back as far as 1890 bothers me. After I retired, I spent many months checking conventional "wisdom" as expressed in various common aphorisms. E.g. "The first hour (or half hour) is dumb money; the last hour (or half hour) is the smart money." None, and I mean not a single one, had any value as a predictor, statistically. But although I used CAPE, I limited it to the period from 1971, e.g. 1981 to the present with daily, weekly and/or monthly data. 1971 is also arbitrary, but I justified it by starting when Nixon closed the gold window and kicked off the modern era in foreign exchange for the dollar. It is a tough call, I agree, but I have trouble using data from when the US was a rapidly industrializing country, takes us through two world wars, multiple major financial and economic collapses... it doesn't seem realistic.

    Third, did you force alpha to zero (i.e. a zero intercept)? I am guessing you did, but I'm not sure why you would make that choice.

    Fourth, did you test that all the variables are normally distributed, or did you make an adjustment to make them so?

    But these are quibbles from somebody who spent far too much time running multiple regressions and ended up convinced that, indeed, statistics express our ignorance, not our knowledge. Carlyle was right. It is still a fine and interesting piece of work - and since your recommendations overall exactly match my investment strategy, you must be a smart person. (grin)
    Jun 14 04:07 PM | 1 Like Like |Link to Comment
  • S&P Model Abuse [View article]
    Thank goodness that isn't a forecast. The first rule of forecasting is that you can be specific about a target or specific about a date, but never, never both at the same time.

    Personally, I use my magic 8-Ball and get results that usually beat Barron's Roundtable. (Okay, that's not saying much given the amount of pump and dump from the Roundtable.) "Reply Hazy, Ask Again Later" is exceptionally useful in keeping me from doing anything.
    Jun 8 08:48 AM | Likes Like |Link to Comment
  • Deflation Investing Strategy: Five Things You Should Know [View article]
    Well, with my 20-20 hindsight from up here in June 2012, I'd say some of the predictions didn't quite pan out.

    "Dollar will continue to climb":
    DXY 5/7/2010: 84.35; 6/7/2012: 82.22. Granted, there were swings in the period, but if one is talking about long term macro-related trends, I wouldn't call that a major rally - or any kind of rally.

    "Stocks will get creamed":
    S&P500 5/7/2010: 1,110.88; 6/7/2012: 1,314.99.
    "You can expect a sub-600 S&P":
    Interperiod low: 1,022.58 (July 2, 2010) Unfortunate, since I am sitting on too much cash and I'd pile in at S&P 500 of 1,000. (My bonds continue to mature and I'm not replacing them with five and seven years rates where they are.) And at the current CAPE/PE10 level, I'm not buying a lot of equities either.

    "I think we’ll see single digit silver again before we see silver north of $25":
    SLV 5/7/2010: 18; 6/7/2010: 27.79. In between, a spike to the ridiculous price of 47 (4/27/2011). Still, 5/7/2010 was pretty close to calling the bottom. SLV was flat until September 2010 when it started its rocket ride to the ludicrous. Never got close to single digits.
    "Crude oil collapsed into the $30s last time, and I suspect it could drop even lower this time around."
    Brent crude 5/7/2010: 82.5; 6/7/2012: 99.93. Ok, it fell into the 70 range from time to time in the summer of 2010, but in the early fall went solidly north of 80 again on its way to 125. (The recent drop from March 2012's 125 level is interesting, I admit.) Still, that is a long way from 30.

    "Financial Institutions Will Fail"
    Bank failures from May 2010 - end 2010: 92 - 11.5 per month
    Bank failures in 2011: 92 - 7.66 per month
    Bank failures to 2012 up to May 30: 22 - 4.4 per month.
    Yes, financial institutions will fail. But the data doesn't seem to show acceleration.

    The FDIC still seems to be with us... but then I don't trust the government a whole lot anyway. "Believe half of what you see and none of what you hear"

    An actual fast deflation would be brutal, I agree. A hyperinflation would be as destructive, not least because it wipes out the assets of the middle class and the young, which can lead to, oh... Hitler. A gradual deflation could give us back a stable rentier class - and I've always wanted to be Bertie Wooster, myself.
    Jun 7 05:10 PM | Likes Like |Link to Comment
  • Facebook: Who's To Blame? [View article]
    Thank you for the numbers.

    So, 91 days out, 8% of the shares could come on the market.
    151 to 180, 12% more, including options;
    181 to 210, 65% (that seems high - are you sure about 1.3 billion shares plus 18 million RSUs? I thought that the total number issued was around 2.1 billion shares.)
    211 to 365, 6.5% more.
    366 and up, 4.5%: i.e. just about all the rest.

    I would purely hate to be one of the option holders, particularly if they had to exercise the options at the point of the IPO. They might find themselves stuck in the AMT ISO trap, which hurts badly. (Speaking with bitter experience)

    But either way, I can't see much of an upside for FB stock. Unless one believes in miraculous intervention, and I left the Catholic Church years ago. <smile>
    May 22 07:38 PM | Likes Like |Link to Comment
  • Facebook: Who's To Blame? [View article]
    I agree that the IPO was botched in the delays, and particularly in the delays in reporting, although who exactly was to blame for that I don't know. It doesn't seem to me that the volume of shares in FP should have been enough to overwhelm NASDAQ - but perhaps I don't understand it well enough.

    As for the pricing, I think that was not botched at all. The underwriters are supposed to maximize the money going to the company. That certainly seems to have happened here, although shareholders subject to the "freeze" period are probably grinding their teeth. (Is it true there is only a 3 month freeze, instead of 6 months?)

    It's our expectation (we fluffy bunny angora retail investors, waiting to be fleeced) that the incredible "pops" post IPO in the tech boom were the norm. That phenomenon was investment bankers ripping off the owners of the company by underpricing the IPO. Which, of course, allowed the banks to direct shares on issuance to their buddies, politicians, executives of potential or existing clients, etc. etc. who then flipped them during the pop for a quick profit. Why would the I-banks do that? Oh, in exchange for... "goodwill", shall we say, if you want to be charitable.

    Still, like many others, I wouldn't touch FB at anywhere near its present price, and probably not even at a penny stock price. But then, I wouldn't (and don't) own Google, either, or Yahoo, or any of those other yahoos fighting for a cut of online ad revenue.
    May 22 04:04 PM | Likes Like |Link to Comment
  • A Stock Buying Moment For Long-Term Investors [View article]
    Tim - I'm not disputing your analysis on the Dow, since I don't follow the Dow. It seems too artificial to me - like paying attention to the "Prime rate" when LIBOR is available.

    I prefer the S&P 500 for its comparative breadth. For market valuation, I believe the PE10 (aka CAPE) is the most realistic. (All "forward P/E ratios" are merely guesses, and usually far too optimistic, and TTM is overly volatile.) The PE10 has recently fallen from its top historical quintile to the top edge of the second highest quintile, at 20.8. That's quite high, although nothing like the 44 posted in 2000.

    I've been selling into the rallies since early 2011 (as well as buying a few real stinkers for which I'm kicking myself right now) and my equity exposure is down below 30%. It may be that you are right, and we are poised for a major boom, but my father taught me to avoid buying something that already expensive - because you're counting on a Bigger Fool to come bail you out. [We both got out of the market completely in December of 1999 and in mid 2007, although both times for the "wrong" reasons. Sometimes it's better to be lucky than smart.]

    If the S&P falls to 1,000 - or maybe even to 1,100 - then I would have less trouble getting back to 80% equity exposure. (20% stays in double tax free municipals that I bought in 2008, laddered between 3 and ten year maturities. I'm not selling because I can't replace those tax free yields, and I do need income. I'm retired but can't collect my piddling little SS checks for several years.)

    It was glorious to pile in all the way in early 2009 when the SP10 was at 13 and ride it up for two years, then sitting tight during the dips and selling into the rallies. But for now I'm happy enough to be on the sidelines, waiting. And, yes, slowing losing value to inflation.

    On Wall Street, nobody "knows" anything. The MBA motto is, "Often wrong, but never in doubt." (I'm an MBA and served my time in the financial markets - The City, not Wall Street - and I know now that I knew nothing then. I bet in 2022 I'll be saying the same thing about my 2012 self, but stupidity never slowed me down.)
    May 19 11:31 AM | 1 Like Like |Link to Comment
  • I Told You So: Facebook's Ugly IPO Debut [View article]
    An old Wall Street saying: "The client made money, we made money, the customer... well, two out of three ain't bad".
    May 19 10:12 AM | 2 Likes Like |Link to Comment
  • France Telecom: Post-Earnings, Can It Still Pay A 13.97% Dividend? [View article]
    Rupert - I mostly agree with you, and I am long STD and considering getting longer. STD is not so dependent on the Spanish market as to deserve being taken out behind the barn and shot, the way other Spanish banks have been and (rightly) continue to be.

    Still... as Keynes said, "The market can remain irrational longer than you can remain solvent." Perhaps some level of prudence, or hedging, is required.

    <sigh> "Fear and greed, greed and fear: nothing else holds fashion." (apologies to Shakespeare)

    Good article, though.
    May 17 10:00 PM | Likes Like |Link to Comment
  • Leveraged And Inverse ETFs: Suitable Only For Short-Term Trades [View article]
    Impressive results on the Motley Fool. Congratulations.

    Indeed, you are right that buying puts on the underlying index seems cheaper than buying puts on the leveraged. (Based only on the most cursory and brief examination.) But doesn't that suggests that selling instead of buying is worth investigating? You could capture the overpricing, spread willing and the crick don't rise. I'll look into it.
    Apr 18 04:41 PM | Likes Like |Link to Comment
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