txlaw

Andreessen is a blowhard. No reason to get all riled up about him being the a-hole that he is. WEB's comments on bitcoin have to do with whether or not it is money and a good investment, not the technology behind it.

Hi Txlaw, This has happened to a few people in the last couple of weeks. Please clear out the cache in the phone, tablet or laptop. Sometimes stored pages or info won't update as they continue to go to the same stored page. If it still happens after clearing out the cache and history, send me your IP address for you phone, tablet or laptop? Someone I banned was using hundreds of IP addresses…some of which belonged to other boardmembers. Not sure how that occurs. Let me know if that works. Cheers! Yup, cleared the cache after I posted, and that solved the issue.

Tried to browse the forum on my iPhone without logging in. I'm getting the following error message: "Sorry Guest, you are banned from using this forum! This ban is not set to expire." Not sure why that's occurring.

http://www.nationaljournal.com/energy/white-house-walks-line-between-energy-production-and-climate-issues-20140304 http://www.nationaljournal.com/energy/republicans-ukraine-crisis-builds-case-for-natural-gas-exports-keystone-20140303 http://www.nationaljournal.com/energy/crude-oil-export-battle-flares-with-dueling-reports-20140303 GOP report referenced in the second article is attached. 20140204LNGexports.pdf

http://www.bloomberg.com/news/2014-03-04/ukraine-seen-building-support-for-u-s-natural-gas-export.html

http://www.bloomberg.com/news/2014-03-02/russia-gas-threat-shows-putin-using-pipelines-to-press-ukraine.html It's beyond me why we (the U.S.) are moving at such a glacial pace with regards to nat gas and petroleum exports. It could be the right people in power are listening to our best advisers: http://seekingalpha.com/article/1574232-charlie-munger-energy-independence-is-dumb I'm a big Charlie Munger fan, but he's dead wrong on this issue. The geopolitical benefits of accelerating the creation of a global natural gas market, and exporting a ton of oil from the US (which won't be part of any energy cartel), far outweighs some notion that we should be hoarding hydrocarbons because of potential food supply issues. Furthermore, I think he's just wrong that hydrocarbons will be in short supply and prices will skyrocket. I believe that we should extract as fast as possible, get everyone in the world more industrialized, and use the wealth that is created to accelerate a century-long switch to renewables. As renewables substitute for fossil fuels, I wouldn't be surprised if prices stay relatively stable as the supply/demand equation for fossil fuels changes. "Energy independence" is not really the issue. The point is to create a global natural gas market, which is the exact opposite, and to drive price down for oil through markedly increased supply that isn't subject to OPEC shenanigans.

http://www.bloomberg.com/news/2014-03-02/russia-gas-threat-shows-putin-using-pipelines-to-press-ukraine.html It's beyond me why we (the U.S.) are moving at such a glacial pace with regards to nat gas and petroleum exports.

The BAC investment is insane. Best investment he's made in the last however-many years. What's IV on the warrants right now? If you have a strong opinion on BAC, as many on this board do, the compounding on that until expiry is gonna be awesome.

I wish Apple would just make iMessage cross-platform.

Telegram had a massive spike in popularity that seemed to coincide with the WhatsApp acquisition and then the outage that they had. Good for them to capitalize on it. I've been wanting to try LINE, which is very popular in Japan and part of Asia. They seem to have an interesting model. I'll have to check out Telegram too. I tried LINE. I'm not into the whole in your face monetization strategy they have. It's also too cutesy-kawaii for me -- must be an East Asian thing (jk, jk). Telegram is supposedly a non-profit venture. It's really fast, and it has encrypted "secret chat" functionality as well that uses RSA public key encryption. They're based in Berlin, which means that they are likely very, very privacy aware. In fact, if their servers are in Germany, they are likely subject to Germany's very strong data protection authority. The logo is also pretty sweet. Although there appears to be some dispute as to the "secure" nature of their "secret chat" option. Would be interested to hear from anybody on the board who has more knowledge about crypto and the way these guys have implemented their supposedly secure solution.

Telegram had a massive spike in popularity that seemed to coincide with the WhatsApp acquisition and then the outage that they had. Good for them to capitalize on it. I've been wanting to try LINE, which is very popular in Japan and part of Asia. They seem to have an interesting model. I'll have to check out Telegram too. I tried LINE. I'm not into the whole in your face monetization strategy they have. It's also too cutesy-kawaii for me -- must be an East Asian thing (jk, jk). Telegram is supposedly a non-profit venture. It's really fast, and it has encrypted "secret chat" functionality as well that uses RSA public key encryption. They're based in Berlin, which means that they are likely very, very privacy aware. In fact, if their servers are in Germany, they are likely subject to Germany's very strong data protection authority. The logo is also pretty sweet.

Ditched WhatsApp. Started using Telegram. It's pretty awesome.

This is great -- will be forwarding it on as well. Thanks for posting.

Interestingly, if you play around with the IV of FB stock, then you can get to a price per user that's similar to the Skype acquisition, which was done all in cash and was apparently around $14.70 per active user. For example, let's say that FB stock is really worth $0.25 on the dollar. The potential $15 billion in stock is then really worth only $3.75 billion in IV. That comes out to $7.75 billion of IV ($3.75 billion stock, $4 billion cash), which is around $17.22 per active user. If there is an immediate bump in WhatsApp active user usage and WhatsApp's users are sticky (a big assumption), then the price per active user will go down immediately. This is clearly a defensive acquisition, just as MSFT's buy of Skype was defensive. I've not done any real analysis of FB, but apparently FB is on a run rate to generate after-tax income of over $2 billion annually. I suppose it's possible that FB has determined behind the scenes that the existential threat from messaging apps is enough to threaten at least $7.75 billion (NPV) of economic profits. Imagine, for example, if BBRY at close to its peak market cap of around $70 billion, had diluted its shareholders to buy Lenovo or Foxconn. BBRY could very well have avoided being a cigar butt trading at a sub-$5 billion market cap. Maybe. Anyways, I think the main conclusion to draw from this deal is that FB stock is likely waaaaaaay overvalued.

Btw, what happened to our resident Valley tech guy? I noticed he is now listed as a guest.

So do you think FB will turn WhatsApp into a Line-like app?

I've been using WhatsApp for a while now. Primarily because a family member didn't want to pay for text messaging on AT&T, but I actually like the app. It'll be interesting to see how Zuck tries to justify the purchase price. Even assuming that the stock currency is actually worth a fraction of the nominal market value, FB still paid out $4 billion in cash. Amazing.

Txlaw -- anything else you can share about what Brian said? Thanks. I can't really recall the specifics. For some reason, I feel like it was quite similar to Kyle Bass' view of the world at that time. My major takeaway was that HWIC had positioned the portfolio in a way that was anticipating some sort of global macroeconomic disaster -- an echo of the financial crisis due to money printing and governments taking on more and more debt. And that because they really believed in this view of the world, they would not be taking the hedges off anytime soon. Since I totally disagree with the hedging strategy, it was a very worthwhile thing to hear from someone other than PW because it solidified my decision to stay away from FFH until they actually take off the hedges.

Brian Bradstreet may also be the guy who is most responsible for FFH's hedging strategy. He spoke at a small get together the day before the FFH meeting last year, and he was very, very bearish on the macroeconomic environment -- in a way that made it seem like he might be the one driving the macroeconomic focus at FFH. Very Austrian viewpoint on the world. For those of you who are going to the meeting this year, you might want to see if you can get Bradstreet's updated thoughts on the macroeconomic environment and the hedging strategy.

One of my biggest mistakes ever: selling out of Comcast at $25 a share and never putting any money back in.

I'd rather not say, unfortunately.

I agree that price is a huge factor. If VZ dropped 50% tomorrow, I'd make it my entire portfolio. I myself have some telecom investments. But what John Hempton says is not insightful in this regard. He hasn't thought it through.

Well, if there is no tower nearby, or some other access point that is connected to the fiber networks, then the only way to get wireless would be via satellite. But there will absolutely be more towers built. Already, many of the highways in the US are mostly connected to the Internet because towers have been (or are being) built along them. But the fact that most "on the road" connectivity will indeed come from towers connected to the Internet doesn't mean that the incumbent wireless providers win from that. First off, the assumption that there won't be wifi (or some other non-cellular) connectivity from those towers doesn't necessarily hold true. A tower connected to the Internet is just that. It's not the last mile connection. Spectrum is the RE over which the signal must travel, and while the incumbent winners have the best spectrum and network of access points at the moment, one can already see strengthened competitors and new competitors emerging. I'll just give you a hypothetical scenario. Charlie Ergen controls DISH, which has a bunch of spectrum that can be used for cellular and ancillary terrestrial component (ATC) connectivity. Let's say he successfully buys T-Mo. He can then contract with tower companies and backhaul providers to provide a viable nationwide network of last mile wireless connections. And then what if he decides to partner with a MSO o fill in the gaps of connectivity via coax and wifi, and to send his content bundle over their pipes. All sorts of interesting partnerships could form in the future. I can guarantee you that John Malone is cooking up something good in this regard. Google is probably thinking about doing something interesting here as well. All of a sudden, VZ and T-Rex aren't the only game in town.

Wireless coverage is really about more than just cellular towers. When you boil it down to its essence, it's about getting access to the communications networks in the easiest possible way, and that does not necessarily have to be done through the infrastructure and RE that the traditional wireless carriers control (i.e, their spectrum positions and cell tower networks). If I am a consumer, I don't care about what technology I use to connect to the Internet. What I care about is ubiquitous connectivity, high throughput, low latency, and mobility. The reason I go with the traditional wireless providers is because they offer me a last mile connection that I can utilize pretty much anywhere with devices that I can carry around with me. At this time, VZ and T are the big dogs of this space. In fact, they're really the only game in town -- as of now. That's why there is pricing power -- not because of capacity issues. In this type of situation, when new entrants come in that have a viable alternative to what you're selling, you have the double whammy of losing market share and price competition finally taking hold. And that hopefully (for the consumer) means reduced ARPUs/ARPAs -- or at the very least, more value for each dollar spent. Why would new entrants come in? Because there is finally economic opportunity in this space for these new entrants. The wait and see approach generally works when technology brings costs down and the market for your proposed services solidify, as John Malone has proved over the years. Someone already mentioned "carrier wifi." Why are these big wireless providers working on carrier wifi? Because they know that all consumers care about is having ubiquitous connectivity. AT&T's goal is to give you a very high speed connection from anywhere and convince you to subscribe to their services on a monthly basis. But what happens if the MSOs (cable cos) start blanketing cities with their own wifi access points and partnering with wholesale wireless providers (or white space providers) to fill in the gaps? All of a sudden, you have viable alternatives to AT&T and VZ. I can turn to TWC, for example, for all my connectivity needs instead of AT&T. What if big tech decides they will try to subsidize connectivity for customers who use their services by purchasing capacity from the wifi providers, sat cos, wholesale wireless providers, or whomever? What if content providers who also control communications infrastructure can subsidize their high margin content bundles by providing low cost Internet access? And if we get a metered world, then you start to see things changing even more. Consumers will be able to hop on and off people's networks in a much easier fashion. Again, IMO, it's not really about the spectrum positions and cell tower networks over the long run. It's about being a low cost provider of connectivity and about customer relationships. The telecom and media industry contains some of the best businessmen in the planet. IMO, for the vast majority of investors, they're better off putting their money with the John Malones, Brian Roberts, Barry Dillers, and Charlie Ergens of this world, rather than trying to do it themselves. Even WEB played this space by partnering with Tom Murphy.

I listened to Hempton's thesis. It's shockingly simplistic. Ultimately, he boils down his telecom investments to this "engineering question" of whether there are limits on data transfer capacity, but that's a very uninformed way to view the telecom space. Data transfer is a commodity business. And anybody who knows anything about the communications industry understands that the unit cost to transfer bits is constantly dropping and capacity constraints have more to do with economics than technology. Thus, while there are spectrum capacity constraints based on current technological limitations, market structure, and the regulatory regime (as of now, much of the best spectrum for wireless data transfer is controlled by a few companies who have acquired rights from the government and through M&A), the absolute capacity to wirelessly transfer data is really not an issue over the long run. In the US, pricing power in the wireless market has resulted from the duopolistic market stucture (can't speak to other countries), and there are signs that this market structure is finally starting to break down as a result of increased competition from all types -- strengthened traditional foes (e.g., S and T-MUS), the MSOs (Comcast, Charter, etc.), satellite co's (e.g, DISH), white space providers, big tech, etc. As technology evolves, there will definitely be increased competition, and you could start to see a transformed market where consumers are able to hop on and off different providers as necessary. At that point, the low cost providers have the advantage, but there is no pricing power. Bottom line, Hempton is confusing the benefits associated with last mile monopolies and network effects with capacity constraints. He had better watch his butt on the downside. First, focusing on P/E is a bad idea in the telecom space, and you have to have some idea of what owner earnings are versus GAAP earnings. Second, the fact of the matter is that these companies are the ultimate fixed cost companies, and they live and die by operating leverage. That is, if $1 of revenue goes away, you might see something like $0.80 of profit go away. The reason why a lot of telecom companies trade for what appears to be low multiples is that there are substantial threats to their revenue bases, and they're investing like crazy (in many cases, what appears to be "growth" capex is really "maintenance" capex) to replace this revenue. So you can't look simplistically at the surface numbers. Third, there is no guarantee that their investments will pan out, especially when they put money into new business lines where they do not have a core competence. Fourth, telco companies tend to have high financial leverage as well, which can be very problematic if the utility revenue base transforms in a rapid manner, which is the threat that these guys face. Also, one hugely important fact -- the communications industry is one of the most highly regulated industries there is. Therefore, the prospects for a biz can be vastly different based on the regulatory regime in which one plays. You can't assume that what goes for a US telco will play for an Indian or Turkish telco, for example. So having a general thesis on global telecom is a bad idea, IMO.