Eric50
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Posts posted by Eric50
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I also started a position in MSFT this week. The weird thing is that I could not find a reasonable explanation of why its price decreased so much the past few weeks. It went below $25 on Wednesday and rose back to $26 today and I could not understand why we had such a swing...
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Good interview of Rogoff last week in the Washington Post.
http://voices.washingtonpost.com/ezra-klein/2010/05/ken_rogoff_it_really_boils_dow.html
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Seth Klarman spoke recently at the CFA Institute in Boston. He is quite concerned about the markets and the economy:
"Given the recent run-up, I'd be worried that we'll have another 10 years of zero returns."
"I'm more worried about the world broadly than I've ever been in my whole career."
Owns far out-of-the-money puts on bonds to hedge inflation risk.
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Sometimes the best thing is to do nothing. I'd bet Buffett is playing more bridge than usual these days...
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+10% today...
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I'd be very careful with shorting Netflix:
- Netflix benefits from a huge network effect and might be on the verge of winning the digital video battle. Back a year or 18 months ago, it was just an internet DVD rental business that had revolutionized the industry with its flat fee model (no late fees - that killed BlockBuster). But it was just a "time business" as everybody knew that the next support for movies would be digital. Nobody knows yet who is going to win that digital battle but it seems that Netflix is moving ahead of the pack. Their recent metrics showed that more and more subscribers are using their streaming service (could be done with an Xbox or with a Wee now). I personally canceled part of my Comcast subscription and reactivated Netflix a year ago so that we could us the streaming. I'm saving $50+ a month and my kids like the service better. I see lots of anecdotal evidence that I'm not the only person making that move. So, in a work, it's a business that has a huge momentum. I'd advise you to read the "gorilla game"; it discusses in depth the impact the network effect can have on a stock;
- While I also believe the stock is overvalued, we are - again - in a world of zero interest rates. See what happened in 1996-1999 or in 2003-2007... There were lots of overvalued stocks that kept going up for a long time. How would you have done if you had shorted amzn at $50 in 1999? You'd have had to wait 2 years before it went back to that level... Jeremy Gratham, in his latest letter, also thinks that there is a significant probability that the markets keep going up in the next 18 months...
- Remember Keynes: "Markets can remain irrational longer than you can stay solvent."
Eric
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Even better, Jim Grant nailed it perfectly on Bloomberg. "Just a guy in a business suit." A must watch...
http://www.businessinsider.com/jim-grant-alan-greenspan-2010-4
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Bogle commented on Greenspan testimony and called it "disingenuous". I personally think Greenspan deserves more flak than he currently gets. He is trying to rewrite history in his favor. Intellectual honesty would require him to admit his mistakes. It would help others (read Bernanke) not to make the same ones. What a disaster...
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yes, he came clean in congress on the regulation side: he admitted that he never thought that bank CEOs could behave so recklessly... However he never came clean on the printing side of the problem. He and Bernanke have never recognized that the low interest rates of the early 2000s were a key trigger of the real estate bubble.
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I agree third party is the way to go. However, Overstock has never been very consistent historically. I've also traded successfully the stock a couple of times in the past. But frankly amazon was more scared of them a 5 or 6 years ago when they were growing faster. Since they have had an history of false starts, inconsistent growth and poor controls. I hope this is the right start - I think the business has a lot of potential with 3P and overstocks - there is clearly a niche for that, but I would like to see more growth and more consistent results over a longer period. As a comparison point, Amzn has tripled its revenue in 4 years (2005: $8.5bn, 2009: $24.5bn) vs +10% in 5 years for Ostk (2005:$800m; 2009: $877m). So, if I were Patrick Bryne, I would not brag too much :-)
Monday's call should be interesting. I remember thinking/reading that Patrick Byrne might not stay forever at the helm of Overstock. He might be pushing for growth and try to sell/exit in the next couple of years.
Eric
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Prem Watsa in his latest letter to shareholders mentions the British East India Company as his favorite business from the past. I'd like to read more on the story of that company but there are several books on it available at amazon.com and I'm not sure which one I should pick. Has anyone of you read about that business and has a book to recommend?
thanks in advance
Eric
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In a similar vein, Jehn Bogle interview in the Atlantic is a must read.
http://correspondents.theatlantic.com/lane_wallace/2010/02/original_sin_on_wall_street.php
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Owning hard, tangible assets, especially precious metals is the best answer I can think of. As all paper currencies from the western world are likely to decline in value, you'll benefit from owning commodities and gold/silver.
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Fabulous FT editorial on the coming funding crisis. Favorite quotes: "there is no such thing as a Keynesian free lunch." and "it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. [] the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic."
http://www.ft.com/cms/s/0/f90bca10-1679-11df-bf44-00144feab49a.html?nclick_check=1
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Must read for all investors - Bill Gross latest comments on the markets. Enjoy
Eric
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/February+2010+Gross+Ring+of+Fire.htm
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I read the book too and I subscribe to Grant's letter. He is really really good and I think the $800 subscription fee is really worth it. I've already made my money back several times with some of the ideas that he generated.
Eric
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Another example of inadequate behavior that I read recently came from Limoneira, a real estate and avocado/lemon producer in California:
"Additionally, the Corporation has invested in the career of Charlie Kimball, a Formula 1 racing driver,who is related to a member of the Corporation’s Board of Directors. Included in other assets at October 31,2008 and 2007 were $200,000 and $100,000, respectively, of costs related to this investment." - Limoneira 2008 Annual Report, page 20 (http://www.limoneira.com/pdfs/2008_Annual.pdf)
Do you fancy a career in formula one?
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Here is his latest monthly letter. A must read in my opinion with some data on why he is so bearish.
http://www.zerohedge.com/sites/default/files/Sprott%20December.pdf
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Really good interview of McCulley who highlights the key risks in 2010. The funding crisis is getting closer:
Key quote: "We’re probably going to have a $1.4 trillion deficit this year without the Fed on the buy side of the market for duration. There is major uncertainty about how the supply/demand equation for duration will resolve itself when the Fed is out of the picture."
http://www.advisorperspectives.com/commentaries/pimco_122609.php
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Quite an old video (2004) but provides a good background on online retailing and its competitive advantages. The speaker is a former SVP at amzn and quite brilliant.
Enjoy
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For the shareholders of OSTK, AMZN or other online retailers, NYT article on sales tax collection. Looks like the tide might be turning soon.
Eric
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yes but there is a catch. It's a spin-off out of an REIT and that REIT owns the real estate where the truck stops are located on. The parent company charges TA a lot for the leases....
Also, the margins of the business are dependent on the price of oil. When oil was at $150 last year, they were losing money because they still had to pay their rent. When oil was at $40 early this year, it was a huge cash cow...
Super low valuation but risky long term if you see much higher oil prices in the future.
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Institutional pressure. They don't want to be the last big bank to repay Tarp. Sad...
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Must read article to better understand the looming funding crisis of the Federal US government. From Niall Ferguson.
Enjoy
Eric
MSFT
in General Discussion
Posted
Sanjeev - you had me. I was thinking: "but this is old news...". Having said that, the 4% swing that we had the past 2 days is high for a period with no real material news. I think it's just the markets that are nervous. Hopefully, it will go down more in the near future and provide an even better entry point.
Shalab - I disagree with your first point:
I think Windows 7 has a lot of momentum. The numbers I have seen are very compelling. For example, Dimensional Research polled a large sample of IT professionals a couple of months ago and 87% responded that they planned to migrate to Windows 7. Just yesterday I had lunch with a friend who works for a large Fortune 500 firm and he confirmed that all new PCs are now systemically coming with Windows 7.
I think the upgrade cycle is just starting to kick in. And there is a huge pipeline of new products that are just being released: Office 2010, Sharepoint 2010, a new version of Digital studios, etc. HP mentioned in its recent earnings call that the PC sales had lots of momentum.
Vista was a disaster and Windows 7 is what Vista should have been. But the moat surrounding Windows and Office is still deep and with lots of sharks.