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  • Dear Tim Cook, Amazon Just Banned Your Apple TV 4 [View article]
    Bezos would not have dared to do this if Jobs was still alive. Can you imagine the rage Jobs would have flown into if Amazon did this? As it was Steve was determined to crush Android but he didn't live long enough to carry out that plan of revenge.

    Having said that I'm not so sure it's smart to antagonize both Apple and Google. Amazon, way more than Apple or Google, is seen as a marketplace where anyone can compete on price and features. I think Amazon is shooting itself in the foot by clearly indicating that no, in fact they are not an open marketplace. They are actually a closed market that sells only what is best for Amazon. Short term? Whatever. Longer term I think it massively damages Amazon's brand if they use a hamfist to leverage their market dominance. Amazon will find out their customers are about as loyal as a mouseclick.

    I don't see either Apple or Google launching any kind of direct retaliation. They both have robust online stores to sell their products so this won't be seen as some kind of "restraint of trade" issue. Also, the high road here has a lot of value as Apple and Google can sort of sit back and obliquely suggest that Amazon must not be able to compete if they're banning devices that people want. Owch.

    So far my read of the online reaction to this is that Amazon is the one wearing the asshat here.
    Oct 3, 2015. 12:55 PM | 4 Likes Like |Link to Comment
  • Russian oil output beats post-Soviet record [View news story]
    You're pretty committed to the idea that Obama is emptying the SPR eh? Wouldn't that be pretty hard to hide?
    Oct 2, 2015. 04:40 PM | Likes Like |Link to Comment
  • Apple Is Building Its Largest Startup Ever [View article]
    I seriously doubt they are building a car. what makes a lot more sense is that they are building a "bolt on" addition that automakers can include as an option or maybe even as an aftermarket add on to existing cars. what will be included? who knows and that's where the secrecy comes in. it's not going to be self-driving. it will, of course mate seamlessly with apple devices. I could see them teaming with telcos to make the car one big hotspot and the like.

    I'd be very surprised if they try to build an entire car. that is a lousy business to be in. as an investor I'd go buy Ford if I want to be in the high risk business of actually making cars.
    Sep 30, 2015. 10:45 PM | 1 Like Like |Link to Comment
  • EIA Petroleum Inventories [View news story]
    I'm fairly sure the wells they closed off were the ones not producing as well as the others. Any good driller is going to drill the best spots first, and move outward from there. This first round of fracking is the best one NA will ever have. Each successive round of wells will be less productive overall as less productive fields need to be explored to keep up production.

    You can see this pretty easily if you look at the well count and plot it against output. It wasn't a 1 to 1 comparison. As the well count went up production didn't go up in a proportional amount. In fact, i suspect that some of the wells drilled later in the cycle were coming up "dry" (producing very poorly). The wells kept open were the very best ones and they're all about to run up against output declines which are brutal on fracked wells.
    Sep 30, 2015. 04:40 PM | Likes Like |Link to Comment
  • EIA Petroleum Inventories [View news story]
    The weekly production just came in at 9,096. That puts NA production down 241K bbd in the span of about a month. personally I think the declines accelerate from here since a lot of the incremental from 7,000 bbd to 9+ was fracking. Those wells run dry in about 18 months and we're approaching that point (if you count forward from when the rig count began to plummet).

    So far this agrees with what I've been saying on SA for months. Fracking is a unique beast in oil production. It comes online fast and goes offline fast. But not THAT fast. I think some people were expecting NA production to drop a month after the wellhead count began to fall. They don't run dry that fast, there is still a lag. But the physics of fracked wells is unforgiving. They produce hard for the useful life and then drop off very quickly.

    I'm expecting to be at 8.5 before the end of the year and perhaps even back in the 7K range in the first 3 months of 2016. At that production level the record inventory levels will burn off pretty quickly. Prices will at least stabilize and maybe even have demand spikes due to weather, war, etc.

    The shorts had their fiesta but i believe our time is coming, and fairly soon too. Once it falls below 9,000 I think that will catch a lot of eyes. And when they start to look they're going to realize that 600K bbd has ALREADY come off NA production in about a year with a lot of that happening recently (meaning the declines are accelerating).

    As always, money where my mouth is. Very long DBO here though I admit I started to accumulate too soon (I didn't think OPEC would be so hard core in defending share). I need about 14 on DBO before I'm back to a net unrealized gain there.
    Sep 30, 2015. 01:31 PM | 3 Likes Like |Link to Comment
  • Caterpillar: Should You Add Now Or Wait For The Bottom? [View article]
    If everyone could see it then oil would be much higher already. Fracked wells begin to decline sharply within about 18 months. So count forward from when the wellhead decline started and see if you can figure out when NA shale production is going to fall off a cliff.

    Further, Iran's oil won't be on the market in time to make up for the gap that's coming in supply. OPEC won't be able to do anything because they never cut in the first place, they're all still pumping full speed. I think the weekly EIA NA production is going have an 8 in front of it way faster than people think.
    Sep 30, 2015. 12:30 PM | Likes Like |Link to Comment
  • Caterpillar: Should You Add Now Or Wait For The Bottom? [View article]
    I'm all tapped out with my last buy at $65.

    I'll take a fresh look if the yield pokes above 5%. In the absence of that I'm ready to just stand pat, collect my div, and wait. My global outlook calls for oil to be significantly higher by the end of the year and substantially higher by March '16. If things play out that way I'll have more confidence in my outlook. If not, I'd be really confused about what's going on and hence more cautious.
    Sep 29, 2015. 02:45 PM | Likes Like |Link to Comment
  • Qualcomm: Patience Will Reward Investors [View article]
    Qualcomm has been working on getting their share based compensation under control. Their shares OS has fallen from a high of about 1.725B to 1.571B over the last couple of years.

    Also, i think there is too much focus on the flagship processor. I think it's a great marketing tool to have the best processor for spartphones but ultimately it isn't the only, or maybe even the most important thing going on for Qualcomm.

    Having said that the 820 looks impressive. If you combine the 820 with Qualcomm's quick charge tech then you could make a flagship that helps address two major complaints about smartphones; charging time and low-light picture quality. Not to mention much lower power consumption as well as being generally faster. I've read a lot about the new security that QCOM has built into the's sort of a real time heuristic malware scanner. I have concerns about that because I'm not sure people want their processor monitoring what they're doing. In a "best of both worlds" situation QCOM will make it easy to shut that part of the 820 off if the user doesn't want it. If they force it on OEMs it could be a problem.
    Sep 26, 2015. 11:10 AM | Likes Like |Link to Comment
  • Attractive Yield With Undervalued Caterpillar [View article]
    Come on! you are messing up my thesis that it's only time to buy when EVERYONE hates the stock.

    I'm only partially joking. This is an excellent article though like another commenter I was a bit thrown off my the 9% discount rate...maybe that was a typo, or maybe you know where to get a safe 9% yield?

    I've written a lot of comments on CAT lately which I guess indicates it's one of my lower conviction buys that I've made recently. The ongoing weakness in commodity markets has me puzzled. I do think it's partially related to an overbuild in capacity due to ZIRP but I'm not sure that explains all of it. Like a lot of others I'm stuck in the zone where it's hard to see the upswing in commodities any time soon. However, I've also written quite a lot recently on the business cycle as it relates to a recovery from a worldwide financial panic and how that differs from a normal recession in severity and duration.

    I suppose the bottom line for CAT, from my perspective, is that if they can weather this without cutting their dividend I'll feel fine with buying here. If it gets so bad they have to cut the div then I'll be feeling pretty badly about buying here. Of course I looked at their cash, FCF, and decremental margins before buying. I think they've got a very good chance of making to the other side without a dividend cut but they don't have an infinite runway like Apple, for example. Things probably have to turn within 2-3 years or it will start to get tight. If this commodity bear somehow lingers for 5-7 years then CAT will be pummeled mercilessly down by forecast cuts and dividend cuts, maybe to the teens. So i guess that's what worries me about CAT. I can't quite understand why commodities are so weak for so long.

    Then again, if oil turns by the end of the year that will give me some more confidence that I do in fact know what's going on.
    Sep 26, 2015. 10:58 AM | 3 Likes Like |Link to Comment
  • Qualcomm: Patience Will Reward Investors [View article]
    When QCOM was trading in the 60s and 70s I was very concerned about the fact that so much of their profit comes from China. I'm still concerned about that but I'm willing to put aside that concern and have been accumulating in the 50 dollar price range.

    This is a smart company that is in a very good business even if it's challenging and filled with competitors. I'm willing to invest at this price level because the risk/reward makes more sense than it did in the 70s.

    Also, I just simply like companies with a lot of cash because it gives them the flexibility to maintain R&D, do buybacks and pay dividends all at the same time. That tends, over time, to make for a powerful upside for investors even in "distressed" companies.
    Sep 25, 2015. 11:59 AM | 1 Like Like |Link to Comment
  • Still Not Calling A Bottom At Caterpillar [View article]
    Ultimately I think most of the developed world is still emerging from the financial crisis of 2008. History indicates that full recovery from a big financial crisis can take 7-10 years.

    Further, EM weakness is hitting at a bad time as developed nations have not yet fully shaken off the lingering effects of 2008.

    The business cycle hasn't been canceled it's just that a financial crisis (particularly a worldwide one) is a much different from a garden variety recession.Also, the unprecedented length of ZIRP is at least partially distorting what the price of commodities would be otherwise. I think ZIRP has caused a supply push but it has gotten ahead of demand. If we were to talk macroeconomics then the governments of the world should be spending more and not trying to rely almost exclusively on ZIRP and QE to encourage growth.

    But that ship has sailed and I don't think it will matter much longer. Before long the cycle will turn and demand driven growth will return (just in time to catch all the commodity suppliers flatfooted). Or maybe the world really has changed and people have quit wanting stuff. I think it's more likely that everyone has forgotten what a financial crisis cycle looks like.
    Sep 24, 2015. 11:53 PM | Likes Like |Link to Comment
  • Still Not Calling A Bottom At Caterpillar [View article]
    In a low interest rate environment it made sense for a long time to build out capacity. We saw that most clearly in oil. But eventually that supply push overwhelmed demand and here we are. CAT being weak for so long is troubling because their troubles appear to have started even before the commodity craze ended. Then again heavy machinery is a leading indicator... Not lagging. If considered that way it is entirely possible CAT is, in fact, near the bottom of a very rough cycle that was made even deeper by ZIRP.

    However a little perspective is called for. The replacement cycle hasn't suddenly been canceled forever. The world still has a massive growing population that is going to need the things made possible by CAT's equipment. Is it risk free? Of course not but if you're looking to get into a heavy equipment manufacturer seems like now is the time to start making buys. As in all things it's best to buy when people are afraid. Assuming, that is, that the underlying company remains viable and I don't get any indication that CAT itself is in trouble.
    Sep 24, 2015. 02:27 PM | 2 Likes Like |Link to Comment
  • Apple iPhone 6s reviews roll in [View news story]
    The true cost of an iPhone is generally overstated. They have a good resale value even used. The same applies to an expensive quality car which may be a bit shocking on the sticker but hold its value much better on trade in.

    Sure you can get a no-name android for $300 but it's worth almost nothing in 2 years. Amazon, right now, will give $270 in trade in credit for a 5s which is 1/2 the cost of buying it new. So the net cost isn't nearly as high as it may seem.
    Sep 22, 2015. 01:56 PM | 7 Likes Like |Link to Comment
  • WSJ: Apple steps up electric car efforts, aims for 2019 shipping date [View news story]
    There is no way they are literally planning to build an entire car. They're going to partner with a car company to build a smarter car. A natural choice would be a company like Volvo that already has some self driving features built into their line.

    I assume they'll also throw security concerns to the wind and connect the cars seamlessly to the internet to enable Siri to control a lot of features. The long lead time here would suggest they're putting quite a bit of R&D into this. But there is no way they're going to build a car from the tires up and go into production in 4 years.

    I think it's a good move. A lot of the new cars today remind me of "smartphones" prior to the introduction of the iPhone. They were clunky, and awful. Then Apple came in and made the smart and elegant. If they can do the same for the tech in cars then that will be a big jump forward not just for Apple branded cars but for everyone due to increased competition.

    Also, it isn't like this is without precedent. Microsoft is on it's third version of SYNC which actually isn't bad but it isn't hard to imagine it being better.
    Sep 21, 2015. 03:23 PM | 2 Likes Like |Link to Comment
  • Oil services down cycle "the worst ever," analyst says [View news story]
    Peak Oil will always be a valid theory from a physical perspective because oil is a non-renewable resource. Wells, without question, produce then peak then decline. The same is true for oil fields, they produce then peak then decline. The same will, inevitably, be true for the entire world.

    Having said that, it's important to note that recoverable reserves is a moving target. New drilling techniques can improve production even from fields that were thought to be depleted. It's also important to understand that just because Peak Oil as a theory is valid from a physical perspective that does not mean that it's also valid from an economics perspective. When looking at energy production from an economics perspective it's easy to state that energy production will never "peak" because as the price rises there will be more new sources created. That's a valid argument because oil is not the only source of energy. There are many sources of energy that become viable as the price of oil rises. These include traditional sources like coal, solar, natural gas, hydro, wind, geothermal, nuclear but also could potentially include non-traditional sources like fusion at some point in the future.

    Also, one interesting thing to note is that despite the massive investment in drilling NA did NOT surpass the 1970s peak of production. They came close but didn't quite make it.
    Sep 19, 2015. 10:48 AM | 1 Like Like |Link to Comment