gokou3

Isn't it at least a major portion of their securities portfolio is supported by the insurance float and thus are reserve requirement?

I also have an iphone 4. Do you use any specific app to read this board or just Safari?

List of Australian stock options available on IB: http://interactivebrokers.com/en/trading/exchanges.php?exch=asx&showcategories=OPTGRP&ib_entity=llc

Anything similar for the retail investor? Guess it's hard to get into CDS / interest rate cap as an individual? I have looked around and only find FXY and JPY/USD futures as somewhat related. On the other hand, I also notice the Greek Athex Composite Share (Bloomberg ASE:IND) index has dropped significantly in the past few years. Can the same be expected in Japan when the JGB starts collapsing?

1. I think this is a valid concern, so I go back to the 2009 10k. Page F-21 ("6. PROPERTY AND EQUIPMENT, NET) shows that Display network equipment has a gross value of $19.2M (all figures in USD). At the end of 2009 CCME had about 20k buses. So, $1k worth of equipment on each bus, which likely consists of two LCDs, one hard drive and player, sound system, and wirings. This figure may be low but not totally out to lunch. If you saw the videos of such a system on a CCME-equipped bus, you can tell that it's not a fancy system by any means. Btw, 2010 run-rate capex is comparable to 2008 and 2007 and is much higher than in 2009. I believe some people made conclusion on the low capex based on the 2009 numbers. 2. I have nothing further to add. :)

I was gonna leave this thread alone until there is further development, but I can't help responding again after reading your multiple posts that pretty much say CCME is a certain fraud. Could you briefly lay out your reasons why you think so? I don't see any specific points from you regarding the company, other than a link to a Barrons article that shows most Chinese RTO are fraudulent.

Your points are noted. Again, time will tell. ;)

I wouldn't say this line of thinking doesn't have any merits, but that seems to be analogous to arguing that the market is efficient (i.e. this stock can't possibly be cheap cuz otherwise it would have been bidded up, etc)? There are occasionally times when some stocks are traded at "absurd valuations"... the members on this board can readily come up with examples of post-bankrupt reorgs, spin-offs, forced selling, etc. It may be true that CCME does not need capital at all. On the other hand, the founders may crave the prestige of owning a US-listed company. Sounds stretched, I know, but I know many people in China want these kinds of status symbols after having accumulated wealth. I think we can see which side is right in a month or so when the company reports 2010 earnings.

Myth, Ya my 80%-fraud quote was from Lei Zhang. Anyways, I don't think you literally put a 2% probability of fraud based on the thread title.. just that you phrased it that way. Btw, I like your thesis on Petrobank and have entered a considerable position. Tim, Yes all along I am on high alert for fraud. I will be the first seller if one day Deloitte resigns as auditor or Starr exits their position. I think the company has some moat, not large but some. Their large bus network provides a valuable ad distribution network that's not matched by many competitors. This will allow them to retain the customers even if they lose their monopoly status. They also seem to have good relationships with governments which are hugely beneficial in doing businesses in China. I agree profit margin will reduce in future years since concession fees CCME pays to bus operators increases at a high rate annually, but the continued increase of ad rates and number of buses should mitigate this. Of course all of these hinge on the company is what it claims to be.

I have no dog in this fight but you seem convinced its not a fraud. Why do you think the report is wrong? Even looking at the title of this thread tells me there is at least a 2% chance its right. Well, I am at least 98% convinced that the company is legit. :) Not trying to sound offensive but it's interesting that you assign a 2% probability of fraud simply by looking at the title of the thread. It's not surprising then a lot of CCME shareholders rushed for the exit yesterday when a second bearish report is released on the company. (First by Citron Research, second by Muddy Waters Research). The MW report is actually quite long and I believe most of the stock sales were done before the shareholders even had a chance to download the report. Let's first look at the background of these two research houses. Citron Research is run by an ex-con, Andrew Left. Muddy Waters released 3 "strong-sell" reports so far, with one success (RINO) and one not-so (ONP). So their batting average is 0.500 excluding the CCME one for which the verdict is still out. There are some interesting commonalities for the two firms. Both are new and very obscure - you can't find any phone number, office address, or even email addresses on their website. The only way that you can contact them is through a web-based form. Both firms listed in their disclaimer that essentially say they can hold whatever positions in the stocks they write a report on, including short sales. I have nothing against people/firms who put money where their mouth is, but this is another food for thought. Another thing: these firms apparently don't seem to be looking for clients. There are scant evidences on their websites that they are seeking clients to purchase / subscribe to their reports. So, I would conclude that the only way the firms can make money from their "research" is to profit from their own trading. Now, compare the credibility of these firms against the ones on CCME's side: 1) Deloitte as auditor. 2) CV Starr private equity of the Hank Greenberg fame 3) Recent CFO market purchases of 100k shares 4) Significant insider ownership 5) "Strong buy" from two sell-side research firms (who at least have contact info, fwiw) There are a few more bullet points that I don't remember, but you get the point. Any US companies that satisfies all of the above points would undoubtly be cleared of fraud accusations. But of course, for chinese reverse-merger company, that's a different story and I understand that. I am aware of the quote that 80% of chinese RTO are fraudulent. However, look at the above list of credentials. There are people who say, "oh even top-notch auditors can be fraudulent!". Yet those are the same people who don't hesitate to trust Citron/MW and the latter's 0.500 success rate. For me, I think it's very unlikely that these auditors/private equity/sell-side analysts/management are simultaneously and grossly wrong. I think CCME is in the other 20%. Now, onto the actual reports by Citron/MW. They are inaccurate and misleading at best, and likely fraudulent at worst. Instead of listing them out here you can check out these links which have refute most, if not all, of their accusations convincingly. I should also mentioned that they seem to be released in a well-coordinated manner, and timed right on Chinese New Year for maximum impact. http://ccme-info.xanga.com/ http://www.facebook.com/#!/pages/Friends-of-China-MediaExpress-Holdings-Nasdaq-CCME/143661355689140 http://seekingalpha.com/article/250498-china-mediaexpress-groundwork-research-and-videos-to-disprove-allegations?source=qp_article So, with all these info, is there a possibility that the company is fraudulent? I wouldn't say no, there's always a black swan hiding somewhere. However, if the financials are to be believed, the intrinsic value of this company is at least $30/share. Would I take a chance that the stock will 98%-likely to more than double? You bet.

It may be true that the marginal cost of delivering an extra GB is a cent or two, but if everyone is downloading another GB then substantial new investment for additional capacity is needed to support that extra required bandwidth. In a sense, judging only by marginal cost is like having the low-usage subscribers subsidizing the high-usage ones.

The stock has been hammered in the past couple days, primarily due to a unsubstantiated and error-proned article by a questionable firm (Citron Research) accusing the company of fraud. It may be a good opportunity for those of you looking for a good entry point. FWIW, there are analyst reports from Global Hunter securities and Northland securities on CCME, updated today: http://www.megaupload.com/?d=7VJFGGSX https://ghsecurities.bluematrix.com/docs/pdf/4b261a09-1768-43bc-ad28-8c669e92e678.pdf?co=Ghsecurities&id=ghsresearch Disclosure: I am long the stock and short put options.

I would concur with this view. Anyone who thinks that MSFT is a value stock should open up their Microsoft Excel spreadsheet and run a number of hypothetical discounted cashflow models. They really only take about 5 minutes to build a 10 year earnings forecast, apply growth rates and discount rates, and then see what you get. When you do this, think very carefully about what sort of discount rate that you would need to apply to MSFT's earnings after about year 5 or so. IMHO, those earnings are so uncertain that I'd want a 10-15% discount rate on anything past about year 5. To be comfortable with MSFT at $27, you need to either be very confident about the distant cashflows (and thus use a relatively modest discount rate) or you need to assume some healthy earnings growth. I'm not saying that MSFT will implode any time soon, but I just can't get comfortable with the numbers and uncertainty. SJ Did you incorporate the $6 in cash per share on the B/S? Nope, didn't go that far. Just discounted the earnings and assumed that they'd all eventually get back to shareholders (which is already a heroic assumption). Even chopping off the $6, you'd need to forecast some growth or use a charitable discount rate to hit $21. I refuse to forecast growth for MSFT, and I refuse to give them a pass by using a low discount rate. I love their monopolies on O/S and office software, but I really don't like the shifting sands upon which their edifice is built! SJ FWIW, I just did a quick DCF calc... I use a starting FCF/share of $2.11 (based on last year's EPS), 5% growth for next 5 years and 0% growth into perpetuity. Then I discount this stream of FCF by 10% annual rate for the FCF in the first five years and by 15% annual rate for FCF in the subsequent years. I get a sum of $20 for these FCF. Adding the $6/share cash would be $26 which is about today's price. In comparison, earnings have grown 10% CAGR for the last 3 years which include year 2008. There is none-to-minimal loss in market share in their core windows and office products thus far.

I haven't given too much thought, but Egypt affecting the world financial markets... really?? For one, I never recall buying anything made in Egypt. (On the other hand, I do like their history a lot, would love to visit one day)

I would think that any criticism of Buffett hoarding cash would be muted after his excellent capital deployment during/around the 2008 crisis (GE, GS, BNI, Wrigley, Swiss Re, etc)...

The way I look at it, cap rate is the investment return demanded by the investor / market. If cap rate adjusts per market requirement (due to interest rate change for example), then rent and/or house price adjusts.

cap rate = rent / house price, so if cap rate increase with constant rent, house price decreases. I believe there's the National Bank/Teranet housing index futures that trades OTC in Canada. Didn't dig too much into how it is actually traded as I presume it's more for the big boys (institutions) and I am not one.

I am also interested in investing in US RE. My chief concern is what happens when interest rate starts its inevitable ascent (this is the one parameter where I have no control over). My plan is to finance any investment properties with a 30-yr fixed-rate mortgage. This way, interest rate hikes won't increase mortgage payments. In addition, higher mortgage payments would mean more potential buyers will remain as renters, so that's a positive as those renters are usually better renters (vs. those who are "permanent renters" if you will). On the other hand, less purchase demand may result in lower prices, resulting in (unrealized / paper) losses. Also, investors may start to demand a higher rental yield, which again pushes prices down. Has anyone done any research for the high-interest-rate 80s what happens to RE prices?

I have a kindergarten's level of knowledge regarding bond research. How do I find out the aformentioned information?

I agree. For the taxpayers' sake, governments should get completely out of the mortgage business. It is really this "assistance" that inadvertently pushed housing prices higher and neglected the effect of the original help.

Well I am certainly no expert but I have been buying 5-6 month expiration calls with strike price about 50% higher than VXX price on a 1:1 #share basis ratio. Sometimes (like right now) I am short VXX without any call protection but on a small position of my portfolio. Thanks. I tend to think with low VIX value now is a good time to have tight call protection against the VXX short, but of course you have already limited your exposure by shrinking the position size. Just my 2 cents. ;)

I am also seriously considering employing the short VXX-long VXX call strategy. I think the key is to determine the proper position sizing and to avoid the outlier event of volatility spike. Your call buying seems to be a great hedge against VXX shorting. Can you elaborate on the VXX call you use and the reasoning: ITM/OTM, front-month/far-month, 1:1 ratio with the underlying? Thanks,

Thanks everyone for the valuable suggestions. oldschool: i will check out Options as a Strategic Investment. packer: I agree with your statement that "call option is the equivalent of buying the stock on margin with no downside beyond the premium. The premium can also be looked at as the price of interest for borrowing the strike price plus a downside guarentee." For certain stocks, the premium is so small that it barely covers the interest and the downside guarantee comes "free" Uccmal: I have been using LEAPs too, the most recent one being VOD Jan2012 20 calls that I bought earlier this year which has turned out quite well so far. How do you select a strike price? For VOD I chose a slightly OTM strike (at the time) because the premium was so small. It seems to always be a trade-off between leverage, premium cost, and downside protection.

Per subject, does anyone have recommendations for a good book or website to learn about option strategies? I know how puts and calls work, etc. so I guess I am more interested in the intermediate/advanced stuff, e.g. learning about specific option combos to apply at various situations. For example, if XYZ is at $20 and I expect it to go to $25 in a year, with expected worst downside at $15, what would be the most optimal strategy? I have read a few books already but they seem to either fall along the "get rich quick" scheme or not provide enough depth. Also, as a long-term investor (hope "option investor" doesn't sound like an oxymoron) I find the option greeks to be not very useful. Thanks in advance.

This bloomberg article says V derives 20% of its revenue from US debit and that the average debit interchange fee is $0.44. If the fee drops to $0.12, that means overall V will suffer a one-time revenue drop of ~15% (0.8+.2*.12/.44). That's inline with its recent stock price drop. Am I interpreting this right? http://www.bloomberg.com/news/2010-12-16/federal-reserve-moves-to-reduce-debit-card-fees-visa-mastercard-decline.html