beerbaron
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Posts posted by beerbaron
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Anyone see this guy on cnbc this morning?
At first I thought he was joking but he is still arguing we have been in a recession for the past two years.
It's because they call the tail of of dog a leg that it makes it true.
BeerBaron
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Hi I have a questions for my fellow Canadians in regards to taxes on options.
If I wrote a contract for 10 AAPL at a 400$ Strike, Expires Jan 2015 about and I don't want to maintaing the full liability + I don't want to pay taxes on the puts. Can I buy 10 AAPL at a 395$ strike to limit my total exposure to 50$?
Would that qualify as equivalent to buying back my 400$ Puts and hence recognizing the gain?
Thanks
BeerBaron
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I agree with the trend here. A mix of 50% broad index and 50% bonds would be appropriate for most people.
I kinda disagree about financial planners, they are paid to sell you stuff and the stuff that makes them money is not low cost ETF. Heck most financial planners would try to sell a 60 year old person a universal life insurance policy as a great investment.
What frustrates me the most is the confusion when I tell them:
[*]Open a brokerage account. It's like a bank account but you can hold dollars or any other securities in there
[*]Buy ETX X and ETF Y based on your time horizon
[*]Repeat step 2 every time you have 2000$
[*]Enjoy your life knowing you made a great deal by buying something that banks would sell you 10 times more
BeerBaron
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I don't want to think about my percentage ownership of FFH because that will make me think of my "look through" ownership of RIM. So, if I have 30% of my assets in FFH, that means effectively I have about a 6% position in RIM? :'(
You could always short RIM to have a 0% net exposure.
BeerBaron
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Since many here have provided some insight into their industry, here's a few unsolicited comments/advice and biased observations from a semiconductor industry non-expert ( an industry analyst may be able to provide much more insight than us engineers)
> The semiconductor industry is very broad and finding experts who understand the entire industry is almost impossible (sometimes even finding experts in each segment is difficult). Moreover, the industry dynamics change very fast and the industry as a whole is quite volatile. I would be careful about listening to any industry insider who claims to be an expert on the industry and even more careful in using their advice as a basis for my investment decisions. Working in an industry doesn't make us experts. In my experience, sometimes a vast majority of employees are clueless about their own company's strategy or financial condition, leave alone the entire industry.
> There was a McKinsey study I read some years back that claimed that in the last 15-20 years, the semiconductor industry as a whole ( excluding Intel) has been a money losing industry. If I remember the report correctly, it mentioned that Intel has created more value than the entire semiconductor industry combined. I cannot vouch for the reliability of that study but just from being an insider, I can say that sounds about right. 'Promising' companies that raise millions from venture capitalists but then fail to make any money for shareholders are a dime a dozen in the semiconductor industry ( true for most of tech sector I guess). For every Intel, Qualcomm, Analog devices, Texas Instruments, Micron there are hundreds that folded or sold out at a loss. The thing to remember here is - be extra cautious when you invest in this industry.
> The cost of building a fab and researching/modelling new processes has grown significantly with each new process generation ( almost 2X for every halving of process nodes i.e say going from 65nm to 32 nm). In the future, very few companies will be able to build or invest in new fabs as processes shrink, since they will need a certain amount of revenue and profitability to justify such an expense ( I have seen estimates that the cost of building a fab for a 300mm/22 nm process can cost upwards of $7Billion and needs sustainable revenues of ~$10 billion to operate the fab. There aren't many companies in the semiconductor industry that generate that kind of revenues). There maybe only 4-5 companies in the world that can build and operate a fab beyond 22nm as the revenues won't be sufficient to sustain such an investment. (other than dedicated foundries, I don't know any company other than Intel, that generate revenues to build and run a 14nm fab ).
This maybe seen as a moat for those companies, although that doesn't mean companies that work on older process nodes cannot compete, but it's an uphill battle. This also means that dedicated foundries/fabs like TSMC and Globalfoundries can have huge advantage and pricing power in years to come. If that happens and more and more companies continue to move to the fabless model, there might be capacity and time to market issues in the future. Unless the industry moves to a different type of basic device, material or process engineering altogether, it's difficult to see how smaller companies can compete effectively with the giants as we move to smaller process nodes. Looking at the flip side of the coin, one can see that if and when the industry moves to some other type of material or basic device ( e.g FinFETs, although who knows) , companies that have invested heavily in the previous gen fab will be left with billions of losses and will either have to retool their fabs at considerable expense or close them down. Some of those companies may not survive.
> R&D expenses as a % of revenue has been high throughout the history of the semiconductor industry. It is not uncommon for semiconductor companies to spend 12-15% of their revenues ( or higher) on R&D. R&D spending as % of revenues has actually been going up in the industry. This makes it even more difficult for smaller companies to compete directly with the large players. Since R&D expenses are always made with the goal of generating future revenues, one way I measure the effectiveness of R&D spending for a company is by looking at next few years of revenue as a multiple of R&D spend and looking at the long term trend.
e.g If a company spent $100M on R&D in 2010, and earned 1B, 1.2B and 1.4B in 2011, 2012 and 2013 respectively. I would often calculate the effectiveness of their R&D by dividing the revenues from 2011, 2012 and 2013 by R&D expenses from 2010 ( in this case the multiples will be 10,12 and 14) and continue doing it on a rolling basis. One can possibly also calculate the 2 year and 3 year averages of this ratio. This is probably not a very scientific method to measure effectiveness of R&D, but I use it to get a trend and compare across different competitors.
> Like any tech company, the best resource of any semiconductor company are it's leadership team and engineering talent. Salaries are sometimes the highest cost in a tech/semiconductor company. Unfortunately, there isn't a good or objective way to directly measure engineering talent and the return on that investment. I tend to use # of patents, design wins/employee ( if available), revenue/patent and patents/employee as rough proxies to gauge the engineering talent of a company. This method is somewhat flawed as # of patents don't tell you the quality or revenue generating ability of the patents, but in the absence of a good metric, this is a useful workaround.
> In spite of the maturity of the industry- semiconductor industry is still growing rapidly ( projected anywhere between 8-15% annually for the next decade). Till about the 2000s, the Americas, Europe, Japan and Asia-Pac ( ex japan) were close to each other in terms of revenues. Since the 2000s however, semiconductor industry revenues in Asia-Pac have grown exponentially. Today Asia-Pac contributes close to about half the total worldwide revenues and almost 3 times more revenue than the Americas or Europe. However, the high growth has also been accompanied by high volatility, which is not a bad thing though as it allows knowledgeable investors to invest during those temporary downswings.
> A consequence of maturity of any industry however, is that the industry is no longer fragmented. There are very few segments and sub-segments within the industry ( processor, memory, wireless, power, test equipment,materials. and even EDA or manufacturing equipment) that have more than 2-3 players who control the bulk of the market i.e 60-80% of revenues go to the top 2/3 players. If you can find a #4 or #5 player in any segment of the semiconductor industry that is consistently profitable, chances are high that they would be acquired in the next few years. Maybe other industry insiders can point me to any segment they know that is still fragmented so that we can look at those opportunities.
> As someone mentioned in this thread, patents are over-rated and most do not make money by themselves. Probably 10% ( or even less) of patents generate 90% of the royalty/licensing fees. However most companies continue to pursue expanding their IP "Portfolios" aggressively. There is also a perverse incentive for senior engineers to file as many patents as possible, since promotions and bonuses are based on no. of patents filed - not the quality of patents or revenue generated from patents ( although some companies may be trying to change this culture).
> Like other high tech industries - Operating margins, Cash flows and ROICs are very important metrics. Although stability in this industry may be fleeting, relatively stable companies with good competitive advantages will have GMs > 50%, Operating margins > 15% and high ROIC numbers over an entire business cycle ( e.g Texas Instruments, Altera, Analog Devices etc). In spite of this, investing in the semiconductor industry has it's pitfalls as it's often difficult to see the danger lurking around the corner and one needs to know where the puck is going ( information about those are not always as readily available). The best companies tend to lessen this risk by constantly shedding low margin businesses/ products and buying or investing in high margin businesses/products that can grow at a decent pace and also by trying to maintain leadership in a few segments of the industry ( e.g a company that is # 3 or #4 in 5 different areas will not last very long in this industry).
That's all I could think of right now - not exhaustive by any means. I am sure others will have different and valuable perspective on the industry and can fill in for anything that I have missed.
Before you take the above info seriously, just remember that we engineers can dish out intelligent sounding BS very confidently, so - verify, verify, verify !! ;)
Thank you for taking the time to provide your tough on all those points.
BeerBaron
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LED Lighting, manufacturing side of the business.
BeerBaron
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One annoyance for Gurufocus is the data is only for U.S. companies.
To access Canadian or International you need a premium membership per area.
Welcome to Canada, every services is crappier in Canada. Management fees, Financial Website, SEDAR, Shipping Charges, Insider Trading Enforcement. And the list goes on!
BeerBaron
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Congrats to everybody with outliers returns it shows how much great minds there is around here. My returns were 23% which is a notch above my index of 50% S&P TSX/50% S&P500. I'm fairly satisfied with it because I have been running my portfolio with 30% cash and that I clone other great investor's ideas (little time invested and ridiculously low fees). 5 Years ago I told myself I would start investing in index funds if I underperformed my comparative index. I am happy to announce that you will see my posts around for another year at least :).
For those that might feel pain reading returns above 30%, 50% or even 100% let me just provide you with two quotes:
"Rule number one, don't lose money. Rune number two, don't forget the first one"
"Envy is the worst of the sins because it gives no pleasures"
I wish everybody an exceptional year in their life and for those that are less fortunate, the strength to face their challenges. As state previously money is the servant.
BeerBaron
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I looked at them 2 years ago when they seem to be very cheap on paper but didn't like their declining cash-flow. Things got much worse since then, so it really seems the stock is cheap for a good reason, hard to see where FFH sees value here.
I looked at them 2 years ago too and I found them really expensive... at the current price tough it's not a bad deal.
BeerBaron
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Why did they disclose it if they were under 5% ownership?
BeerBaron
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What does everyone think about bringing back the partnership model where owners are personally liable? This is how a lot of these large investment and banking houses use to be set up.
Too late, it's impossible to go back now. Also, banks need access to the capital market as it add to their long term survival rate.
BeerBaron
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In old house there are some opportunities for a decent ROI, for example I just replaced my heat pump myself. Total cost was 6000$ including a new electrical entrance (that I could not do). Estimated savings should be about 800 to 1000$ a year because I was initially using oil for heating. Other nice ROI also include windows or insulations in very specific cases.
Also, know your strength, if you don't like working with your hands don't do tasks that are technically difficult. Here a list of tasks/difficulties I estimate:
Everybody motivated can do it
Paint
Plaster (3cm or less)
Simple electrical (know your electric code first)
Floating floor
Moldings
Changing doors
Roof patch
Chimney cleaning
Fairly handy people's can do it
Plumbing
Wooden floor
Ceramic tiles
Windows
Roof Shingles
Dryboard and plaster
New walls
Don't try this unless you have patience, skills and tools
Kitchen Cabinet
Cutting down trees more than 30 feet high
BeerBaron
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The LED candelabra bulbs that I purchased this summer were terrible. 75% of them already need to be replaced -- failed/defective.
The also had too cool of a color temperature. Perhaps this shape is very difficult to get right. The incandescent bulbs look a lot better.
I'd guess it's a more niche type of bulb and the big players probably haven't really focused on that format yet as cracking the regular bulb format will be a lot more rewarding, so most of what is available is probably terrible cheap crap (ie. ask a random Chinese manufacturer to slap the cheapest LEDs they can find in a bulb of that format and sell it without any heat dissipation or light quality testing). Just a guess though, I've never researched that type of bulb as I don't have any.
Liberty, do you work in the LED area too? Because your assesment is bang on of the quality of most China manufacturers.
BeerBaron
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I want to see all my friends and family.
BeerBaron
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I think in the winter months, the big losers are the people who use radiant electric heating. Or electric furnaces.
Absolutely ZERO energy will be saved (during cold spells) by switching to CFLs or LEDs. They'll just wind up paying more for those light bulbs with no compensating offset on the electric utility bill.
They will only see their gains when it is warm enough to turn off the electric heater (after taking account for the lost heat from their lighting).
Is the efficiency of heating form the bulb the same as that from a heater?
No, because some of the energy is "wasted" as light.
I think a lot of the wasted energy comes from the conversion of AC to DC. Maybe I'm speaking generally, but the conversion for the LED bulb has some parasitic losses from the general delivery and conversion of the electricity. Interesting reads:
http://en.wikipedia.org/wiki/War_of_Currents
Well, in the same energy act of 2007 there was also requirements for the efficiency of external power supplies. As of today all external power supplies that ship with another product have to meet Type IV energy efficiency. It's aimed at reducing the losses of AC to DC conversion.
You have NO IDEA how much headache this regulations has given me. These regulations have he benifit of forcing manufactuers to consider energy efficiency even tough the consumer really don't care.
BeerBaron
BeerBaron
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What I don't understand is how the metal housing on them gets so hot you are unable to touch, when they are only using 13 watts.
LEDs are semiconductor devices, the cooler they get the better they run and longer they will last. When designing a light bulb the team's objective is to get the heat the LED produces out as fast as possible. Since heat goes from inside to the outside very fast the outside gets hot. Don't worry, LEDs bulbs will never become as hot as incandescent bulbs tough.
BeerBaron
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i have also recently switch majority of bulbs to LED (the ones that rarely gets used, i left it as the old bulb)
beerbaron, would like to hear about which bulbs is best to buy so that it actually last for 20,000 hrs.
Well, this is the one that won the L Prize. As I said it's been tested for 25 000 hours and still works as new. It's ugly when not lit up tough so I would put in a fixture where the bulb is apparent.
you mention philips brand? is it all philips? or does it have to be philips and energeystar? or would any energystar do?
EnergyStar is really a must because to get the logo the manufacturer has to prove that all components will last as long as expected. Also, to have the logo you have to offer a minimum warranty. I would stay with reputable brands tough, Philips, OSRAM, Cree are the first that comes to mind.
i guess its a little too late, i have already spend a few hundred dollars on the led bulbs hopeing they will last for 20k hrs. but who knows.
You'll know in 5 years from now. Up until then I would not lose sleep over it :)
BeerBaron
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I use CFL bulbs in a few places in my house (because I'm a tightwad bastard careful with my money), but as a matter of principle I oppose banning incandescent bulbs. It is completely offensive to me that governments have the audacity to take away my freedom to choose the bulb that I want without having articulated any coherent public policy objective.
If the concern is that we collectively consuming too much energy, or collectively emitting too many greenhouse gases, then take a coherent approach and consistently ban the most wasteful and least energy efficient devices. So, if my incandescent lightbulbs are banned for being the least efficient lighting option, then my neighbour's Lincoln Navigator should also be banned for being among the least energy efficient transportation options. And my neighbour's pool heater, which consumes as much electricity as all the bulbs in my entire house, should also be banned.
This nonsense of selectively (randomly?) banning products constitutes nothing more than populist pandering to the environuts.
I'm sorry SJ but I have to disagree with you. Banning incandescent is a sensible policy because of the sheer volume of energy wasted in lighting. There are equivalent solutions on the market that not only last longer but also reduce the energy bill. Think of the amount of coal wasted because most people just don' know the more efficient solutions are worth it.
Also, I have not looked at the detail of the law but it's probably aimed at the retail market. Nobody stops you from buying from a distributor or online.
BeerBaron
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Thanks BeerBaron, I will probably change my halogen bulb as they die over the next year!
If you are using 50W Halogen you'll likely be taking some losses in the amount of light output if you switch to LED. It's still worth it in my opinion as you'll save the hassle of changing the bulbs 2 times a year but it's good to know.
BeerBaron
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I think in the winter months, the big losers are the people who use radiant electric heating. Or electric furnaces.
Absolutely ZERO energy will be saved (during cold spells) by switching to CFLs or LEDs. They'll just wind up paying more for those light bulbs with no compensating offset on the electric utility bill.
They will only see their gains when it is warm enough to turn off the electric heater (after taking account for the lost heat from their lighting).
Yes but they still win twice in the summer days since they reduce their AC unit load...
BeerBaron
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The problem I have with LED lights and any longer life product is that for most of the people, it is difficult to believe that they last that long. It is OK to pay more now, but only if I don't have to pay again in 2 years because finally, like I tend to observe with the CFL, they doesn't seem to last what they are supposed to...
Liberty, so far, do you had to replace some of them? I know they have not been on the market long enough to confirm their long life expectancy, but do they perform accordingly to the specs so far among for people who have bought them?
LEDs is my area of expertise. Make sure you buy EnergyStar labelled bulbs and you should be fine. EnergyStar has wisened up and now they require manufacutrers to provide in situ proofs that all components will meet about 20 000 (not sure 20 is the exact number but it's in this range) hours. This forces manufacturer to choose electrical components that cost more but last longer (ceramic cap VS electrolytic).
I would confidently buy the Phillips remote phosphor bulb (it's yellow on top) as it has won the L Prize. It's been running for something like 25 000 hours now and last time I check it had still around 99% of it's initial light output.
http://www.lightingprize.org/overview.stm
So in other words pay the price and you can be confident it will last longer than advertised.
BeerBaron
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They have been relaxing the policy for a long time. They can pay a fine if they have more children. I think the fine is about 10 000$ so it's not a huge expense anymore for the educated population.
BeerBaron
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I would buy an ETF.
Amen, let's say you adhere to the ideology of 10 stock in a portfolio. Just buy 4500$ of index and 500$ of your best pick. As time go by and you add capital, you can have 5000$ index and 1000$ stock picks... keep increasing the ratio until the index becomes irrelevant.
BeerBaron
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Hope it went well Gio, remember the following:
- You are choosing her as much as she is choosing you
- A person's favorite subject is herself
- A person's second favorite subject is their kid or pets
Dating is fun, I'm sure you enjoyed yourself.
BeerBaron
- You are choosing her as much as she is choosing you
Loss Aversion
in General Discussion
Posted
There was a big debate about the Kelly formula regarding wealth optimization VS hapiness optimization. Basically most people's unhapiness will be so bad if they lost 75$ that they will prefer the safe route. I suggest you read Fortune's Formula and Thinking Fast and Slow, they pretty much cover the whole subject.
For me I would be ready to take favorable bets any seconds of my life if it represents less than 5% of my net worth.
BeerBaron