oddballstocks

Good point, maybe I should rephrase that. People who buy IBM believe IT is a competitive advantage, but don't know enough about IT to build something that would provide a competitive advantage or even realize that businesses don't get competitive advantages in IT by outsourcing their IT to someone else. So they go with IBM because of the brand and end up grossly overpaying for mediocre talent. But at least they help incompetent management feel good about themselves. Very well said.

I have a lot of anecdotal stories of companies trying to do anything to escape the clutches of IBM, for cost, for performance, just to be away from IBM. The problem is for large companies with enterprise installations they can choose from IBM, Oracle, or JBoss. None are ideal solutions. The danger is what KCLarkin mentioned, moving to open source. In some ways these enterprise level companies have made their bed. I know some companies that are so frustrated that they're moving to things like Spring self-hosting, Tomcat or any other non-heavyweight solutions. The differences in the companies is clearly captured in their cultures. IBM is known for hiring younger workers without much experience and putting them through the meat grinder. It's just a stop on the resume tour. Their "moat" is that some customers still haven't figured out how to leave yet. Microsoft is out there creating new things and innovating. There has been a HUGE shift in the IT industry with the Ballmer departure. They're releasing what people want and have become much more open. Their platform has some really compelling products. Personally I always had the "unix is great closed source sucks" mentality. But then a project forced us to use C#. Turns out that C# was an awesome language, and now it's completely open source. Long story short, the stuff coming out of Microsoft is so compelling that we're moving entirely onto their platform. A C# hosted app on Azure with a SQL Server backend. Five or ten years ago I wouldn't have believed this was possible, but the business case for it supports the move. Development time is reduced, support time reduced, there is support available, and Azure's servers tick every certification box available. It's interesting to see what's happened on the other side as well. Java, which was known as open source has been closed up by Oracle. Sun was a much better stewart of Java compared to Oracle. You have Microsoft who was previously very closed becoming very open and Java which was very open becoming very closed. IBM used to have their own Hotspot JVM, I don't know if they're still maintaining it.

Don, Per your car example, cars are more similar to public companies than not. Everything about the car that a sales person talks about is public. This is known information that everyone has access to. We all can look at this information and make an informed decision. The inside information could be the source code in the car's computer or machine specs about how the car is built. Maybe these things are important, but maybe they're not. What you're saying is that 100% of everything should be open. I can go to Toyota and demand the source code for the chips that control the radio and they should give them to me. If I find a bug that could cause a crash and others never ask for the source code they deserve to crash because they never asked. It's a fallacy in my view. I've worked at public companies, private companies, and I own my own company. Outside investors want everything, they want ALL the information with zero operational risk. The reason inside information is 'inside' is because it's so much more powerful. In public companies even the secretaries know more than the best informed investors. That's why there are rules around trading. Insiders are so much better informed it's almost crazy. Outsiders want this info. The problem is how do you know an outsider is just an investor (who's contributing nothing to the company, just profiting from your work) or a competitor trying to steal information? In business there is a lot that is secret, and that's normal. I routinely sign NDA's to work with clients and other companies. Once an agreement is in place information can be shared. I think an NDA is very appropriate, some of the information that's crossed my screen is extremely sensitive. This is information that most employees at a company have access to, but it should not be public.

On the Internet everyone is an expert!

Wow! Usually these insider trading cases are political witch hunts, but this seems fairly cut and dry. Cooperman spoke with an exec who shared confidential non-public details and was asked to not trade on them. Cooperman agreed but traded anyways. Then when questioned by the SEC Cooperman attempts to fabricate a story. I know a lot of people like to talk to management, but there is a caveat emptor type situation with it. Executives don't really know what's public or what isn't, or what is or isn't material. Some management plays it very safe and only parrots PR releases. But other managers will share anything and everything. I had heard a story about one smaller company where the CEO told an investor he planned on retiring and selling the company in a few years, a plan he hadn't communicated to any other shareholders.

All good points. I wonder if some of this discussion is also biased because we are people who are well informed. Maybe car makers are listening to their customers, and most customers don't care about EV. My parents are reasonably informed, but I'm pretty sure my mom has no idea what a Tesla is or why she'd want an electric car. My dad likes the idea, but it isn't something woo-ing him. He's retired and doesn't drive enough. So maybe the conclusion is that while we think there is this giant wave coming it's really a tiny wave. This EV/AV discussion could be something that disrupts a few major cities and takes another 20-30 years to trickle out from there. It's like people who are connected discussing how the Internet will change the world in 1992 and how everyone will be connected. The discussion was correct, but it wasn't really until 20 years later with smart phones that this came true. Maybe we're in the 92 stage of cars? It's a very interesting discussion to say the least.

Agreed with Eric. You'd have to use one of those voice masking programs. Once you start to speak your voice might be anonymous to anyone who doesn't know you, but those who know you will instantly recognize it. Even if your voice is changed slightly the way we talk has fingerprints, we have verbal crutches or sayings we repeat that are identifying.

One other thought, Picasso mentioned this. The killer for an EV is the range. In SF or in NYC a 100 mile range probably isn't a big deal. But it's a big deal for most of the country where suburbs are spread out. Consider Atlanta, Chicago, or some of the larger cities where people living 40-50 miles away are still in the suburbs. Commuting into town and home again is impossible unless there's a charger at your office. This is cutting it too close for most, and it doesn't give them the extra distance they'd need for errands on the way home or picking kids up from daycare. If they could get an EV with a daily range of 250 miles I think it'd sell like crazy.

This thread reminds me of the discussion in "The Innovators Dilemma" This is an excellent book I'd recommend anyone thinking about these things purchase and read. The book seems to be common reading in tech, not sure why it isn't in investing. The basic thesis is that industries go through cycles. A company innovates disrupting the current players by focusing on niches that are too small for larger players to care about. But those niches require innovative thinking, and eventually the niche spreads to the entire market because of the innovation. Current market players are caught off guard because they're focused on incremental improvements that current customers want, not a small niche area wants. This is why it is very rare for incumbents to continue through innovation cycles. It's almost always new players that unseat the old players. In autos we'll probably see the same thing. Companies like Tesla unseating current car companies. I was told that the majority of GM's profits are coming from their trucks, their cars make them almost nothing. What happens when gas prices go up? GM isn't going to copy anything, to me their culture is the wrong type for something like this. They have the Bolt/Volt/Spark but they haven't bet the farm on it. I've owned GM vehicles, the only GM I'd ever consider buying again it a truck. I don't trust their build quality for anything but a truck. If I were to project the future you'd have a situation where there are a few car companies that exist now that adapt and stay around. Then there will be some new players like Tesla. Maybe Tesla captures the market and things move in the AV/Uber type direction. That's the wildcard with this.

I posted an analogy and then a few people started to say you can't compare an iPod and a car. I get it. But it's no different than someone saying "XYZ company is like Dempster Mills" does that mean XYZ company is in the same industry and has the same characteristics? Nope, it's an analogy. I found it strange, so I made a light hearted joke about it. I guess this board is not light hearted. I have wandered into the land of seriousness...there are no smiles here....only business people in suits making money...no fun here. If that's the current crowd I've made note and will adapt. I don't live on the coast. In fly-over country people are focused on payments. If something fits into payments then it's affordable regardless of the actual price. I know multiple people who get a new car every few years because "the dealer was able to keep my payment the same." I've asked if the term was extended and they don't know or don't care. These aren't poor people, they're professionally successful middle class people who live the payment lifestyle. This site is skewed to the wealthy, almost wealthy, will-be-wealthy, and this lifestyle might be hard to understand. But this lifestyle is why so many businesses that are touted on here work. They sell an expensive product that's broken down into monthly payments and people buy them on monthly payments. If people paid cash for cars I think the car industry would be completely different. I only pay cash. It isn't easy to save $10/20/30K in cash on a middle-income salary with a wife and kids. And it hurts even more to trade that cash for a hunk of metal on wheels. For me as a cash buyer I'm very considerate about what I'm getting into. Will I be able to fix it easily? Are parts readily available? Will I want to keep this for 7-10 years? What's the resale value. That's because my own money is on the line. I've asked the same question of monthly payment people and they don't care. But if people couldn't finance they would have trouble saving anything to buy a car, a house, almost anything.

Not much second level thinking on here eh? My point wasn't to say the iPod is the same as a car. They are different, but it's how the leaders of both of these companies have framed the product and the purchase. It's emotional, not based on specs or rational. The circuits and buttons on an iPod were commodity items. Same with a Tesla. Obviously things are formed and molded to their own specs, but what I'm saying is what sets Tesla apart isn't some brand new flux capacitor drive that powers the car. GM makes an electric car, Tesla makes an electric car, someone made that EV electric car in California in the 90s that was turned into a movie. My point is electric cars and electric motors aren't what makes this special. Just like playing music digitally from a portable device wasn't special for the iPod. I agree that the iPod had the ecosystem and a superior experience. From what I've read the Tesla car has the same thing. It's a superior experience compared to other electric cars. Have a superior product coupled with a very savvy marketer is the perfect combination. That's what captures mindshare. If I were going to get an electric car I'd probably get a Tesla. When I think about electric cars Tesla is the name that comes up. Does Toyota make one? Who knows, BMW? No idea. Tesla has dominated the namespace for this category. Much the same as Apple did with the iPod. I don't know if Tesla will achieve breakthrough traction because they're selling cars. It's different than a $500 purchase. Yet at the same time it isn't. Most Americans don't have $500 in cash laying around, everything is financed. If Tesla can make their cars fit into payments of $199/mo or less this will have serious traction. Most people I know only care about the monthly car payment. If a Tesla is the same cost as their Acura then it's a shoe-in replacement. Tesla needs to work on building out a financing arm. Maybe they can finance these things for 8 years with an add-on servicing warranty and get it to $199/mo. That price isn't crazy. Keep in mind for most Americans an iPhone ($35/mo plus service $100 for $135/mo just for an iPhone) and cable (average $200/mo) are in the similar ballpark to a car.

Had a thought while reading this. Is the Tesla more like the iPod than the first IBM computer? Tesla has taken existing tech and created a product. It's hard to answer the question "what's the most important part of a Tesla car?" If you were to break it down almost everything is a part any other car company can create. Maybe the software's unique. This was the same as the iPod. The iPod had no special glue making it better. What sets both apart is the experience. It's the marketing, branding, and the experience of owning one of these products. Why did consumers buy iPods over Zunes? They both did the same thing. I think that's what people are asking about the Volt. If you look at specs the Volt is the same, so why aren't people lining up to buy the Volt? It's the disruption field thing. Jobs had it and Musk has it. They make you feel special for purchasing their product. People feel a certain way buying a Tesla. They might even pay more for that feeling. People did the same for iPods. This is a really hard thing to capture from an investment perspective, but it's vital to marketing. If you have a charismatic leader who can create an emotional response to the product you will generate a lot of demand. Leaders like Musk are in short supply. Was Steve Jobs a huckster and hype machine? Yup, probably one of the best. I've read articles describing how carefully planned his demos needed to be so he didn't accidentally hit a feature that wasn't complete or didn't work right. When he unveiled the first iPhone he was mostly selling a dream, not a working product.

Saw a quote recently that Picasso's post made me think of. In essence it said that investors forget public markets are for companies looking to raise capital, that is their purpose. Tesla love them or hate them is using the capital market correctly. It serves their purposes, that investors come along for the ride is secondary to the primary purpose of raising capital. To raise capital you need enough hype that your shares don't trade in the gutter. I don't think Musk could ever be accused of hyping too little.. How this turns out is in the hands of the people who work at the company. I think it's a fools errand to speculate. Personally I'd love a mass market electric car with a long range, a gas assist or charging stations that take 3-5m max. The torque an electric motor can produce is mind numbing. It would be awesome to have a full sized pickup packed with batteries, an independent motor per wheel and a crazy amount of power. A 300-400 kW engine can get to 1,500 ft pounds of torque given a high enough RPM, that's semi-truck territory. The winning combo for now isn't anything new, it's the diesel-electric locomotive. A diesel engine that provides power to electric motors. Whenever I talk to someone about electric cars and they doubt their power I state that if an electric motor is good enough to pull trains across mountains I'm sure it'll be fine pushing a few thousand pounds of metal down the road. The diesel electric enables electric drive motors for a train without the overhead wires.

Because in an M&A deal you're not paying taxes on your purchase. Company A is purchasing company B's assets, of which cash is one. There isn't sales tax like purchasing a car or a good. Think of it like this. You're looking to purchase a nice two drawer cabinet. In the top drawer is $500, in the bottom are Elon Musk's Top Secret Plans Part x. You care about the secret plans, not the cash. You offer $5k for the cabinet. You are really buying the plans and the fact that you receive some cash and furniture is ancillary. Once you close the deal you now have $500 in cash reducing your purchase price to $4500, this is your enterprise value. The "business value" are the secret plans. There are no taxes in this scenario as well. You can't pay taxes on purchasing cash unless you somehow purchase it at a discount and resell it. If I have $1 and you pay me $1 for my dollar there was no gain or loss, it's a fair exchange.

How's it different from the two gods on this board (Buffett and Munger) trying to say they're not exceptional and anyone can do it etc? Buffett is just a "normal guy" like all of us right? Not at all, but that's not what he wants you to believe. But their sins are forgiven because they've made people money.

I hope he does well. He's a kid. When I was 21 I wrote cringeworthy stuff as well. I'm sure at 41 I'll think the stuff I wrote at 35 (now) will be cringeworthy. It's a growing process. Kudos to him for starting early. This board reminds me of something I saw when I was younger and followed a bunch of bands. There'd be these little bands sharing a $300/mo apartment living in squalor playing in disgusting bars that weren't "found out yet." If the band was good they'd start to play bigger and bigger venues, gain a wider audience and move up. Fans always felt they'd sold out. Nothing was as good as the old days when you could see them on Tuesday night when beer was $.25 and wings were $.10 in a basement bar. The problem is those days sucked for the band. Who cares about the music if you're sleeping in quarters that a submariner would say were too small? The board reminds me of those fans. Fund managers are "cool" and doing something different if they manage $2m out of their mom's basement. But heaven forbid some guy wants to hang his shingle, advertise and market themselves and do well. "He's SELF PROMOTIONAL!!!" I wonder if Pabrai ever promotes himself? Or Buffett? Oh wait...those guys are CONSTANTLY promoting themselves. Buffett is the greatest self promotion machine the market has ever seen. He has a bit more experience and has perfected this home spun persona that people love. This is what comes with experience. Maybe there is some level of purity that comes with managing a tiny amount of capital. At least this kid is out there hustling, writing for Seeking Alpha, looking to tutor kids. He'll do well. He seems to know the value of a buck, and he's working hard to find them.

Wha? How do you figure that? Maybe if you distributed the demand across the entire day. But that's not an accurate way to look at it. Most people need transportation at roughly the same time as most other people. Commuting to work, commuting back from work are the two main times that come to mind. How are you supposed to spread your 3 cars across 30-40 people for a morning commute? Simply doesn't make sense. Also, you're assuming that once autonomous cars hit mainstream, everyone will want to car-share. Huge assumption that I simply don't think will be the case. I think plenty of people will still want to own their own car. I also think your longevity assumptions of 600k to 1mm miles are way out of whack. I think your assumptions and the conclusion you've drawn are absolutely insane. Ya I kinda echo your thoughts. Now I haven't read all of this thread, but where did this the rationale that we will want to own less cars come from? Are you saying empty driverless cars will come pick up passengers? I am a carless person. But I will buy a car if it is driverless and economical. So me as a datapoint says that cars will increase. The fundemental change of driverless cars is it allows people to drive who cannot or don't want to drive. So it will mean more cars on the road. How can there be more cars on the road and less cars? I disagree with both of you. Do you have teenage children? My kids don't even want to drive, neither do any of their friends. My son just got his license and I practically had to force him to get it. Yes in 10 years there will still be a bunch of old people driving their own cars (you and me included), but this will diminish every year as these people die off or get too old to drive. 30 years from now there will be almost no human drivers on the road. In 30 years anyone under 50 will look at a car with a steering wheel the way millennials look at CD Walkmans today. "What the hell is that for?". bang, did you read my post carefully? I told you I am w/o a car! I am not like you and I won't be driving when I am old, I am not even driving now! I bet I hate driving as much as your son, or even worse. But driving is an orthogonal issue to ownership. I hate driving but I love being a passenger. I have a GF who drives me everyday but that may change, a driverless car is like having a woman driving me around w/o the issues and the mood swings! I ride a bike, take the train and get a ride to work everyday. If I took uber how will that work? Will all ride sharing cars be able to support my bike? It is so much better to have my own driverless car, with a dedicated compartment in the back for my bike. How do you get to your in-laws who live five hours away? Or your parents who live 2.5 hours away? In both cases there are zero trains, and a flight for a family of five is well into the thousands verses a $50 tank of gas. And it takes as long or longer with security. I don't drive much, but I do have a truck. I have a late model Tacoma that allows me to run errands as needed, and also haul things as needed. It was not very expensive so I'm alright with it mostly sitting idle. My wife drives a lot, with kids it's unavoidable. We walk them to school, but it would be impossible for them to ride a bike to soccer practice. The terrain is very hilly here, and it's a 20m car drive, maybe 45m-1hr for an adult to bike, almost impossible for a kid.. If we lived in NYC or SF or Toronto like most do on here and all family lived in a big city as well I can see how going carless is easy. You take the train, or you fly. Or maybe on the rare chance you venture outside of an urban area you Uber. In fly-over-land (Western Pennsylvania) there isn't the infrastructure to support this. There are trains and some busses, but they're only for commuting. I have no idea if my kids will want to drive. They're too small. One of them loves jeeps and off-roading vehicles, maybe he'll have a mud slinging truck. Maybe I'll be a dinosaur driving, who knows, I accept it. I just wonder how where we live would support all of these extra cars. Think of the traffic jams leaving a high school football game. You'd have a jam of cars trying to get there at the same time, then all leave to go pick other people up, then all come back at the same time and leave again. Where we're at it isn't nice four lane roads with turning lanes. It's twisty little hilly streets that can't be widened. I think the AV car revolution will hit the coastal urban areas first then take another 15-20 years to trickle throughout the rest of the country. It's probably better that way, traffic is an issue in Manhattan, it's not an issue in Paducah, KY.

Or maybe it is? He runs funds, has AUM, earns a living with terrible performance. In some ways he proves the point, if you can tell a good story and pull on those value heart strings performance doesn't matter. The long term numbers for his Canadian flagship fund remain very good. He also helped make FFH a pot-load of money on the CDS position in 2008. That and he has been extraordinarily good to the FFH community. He is well liked for very good reasons. Norm, Thanks for the comments. I agree he's well liked. Maybe the bigger shame is he couldn't turn the CDS trades into trades for his fund. I don't doubt his talent for making money, he's made a lot of people a boat load. I think that's apparent by the crowd that follows him in April looking for tips or ideas. Maybe a mutual fund structure isn't the best for his ideas. Nate

Or maybe it is? He runs funds, has AUM, earns a living with terrible performance. In some ways he proves the point, if you can tell a good story and pull on those value heart strings performance doesn't matter.

Ah yes, the "I'm rich now I need something to do" second act. Grew up with a neighbor like this. He was an investment banker and helped "manage" family assets whatever that meant. Regardless he quit working in his 30s. His second act was to learn to play classical guitar, collect high end stereo equipment, and eventually work an hourly job at a photography studio because he enjoyed it. The guy was great, he was very fascinating. Yet I always knew that what he was doing was mostly unobtainable for most. He had a very high paying job and lived in a modest place (very smart). He leveraged that into time off. He'd alternate working at the studio with playing golf and tennis. They built an addition for his music room, the rumor was he spent more on the speakers and stereo than on the room itself. If this is the second act you're talking about how is it any different than retirement or semi-retirement? Isn't this what most do? "I worked in the steel mill for 40 years, now I do odd-jobs and hang at McDonalds to stay busy."

I love this stream of thought. My brother was a professional musician for a while, then did sales, now is a computer programmer. I know the guy who wrote 867-5309 is now a programmer as well. I've met a lot of people who worked in some professional career capacity and then were forced to or decided to branch out on their own. What's interesting is I'd say the success rate for people starting their own companies after experience is probably MUCH higher than someone in their 20s who's trying to build something out of college. Working in an industry or professionally for years builds a lot of operational experience as well as a large network.

Do you know if the portfolio loans have MTM triggers? It depends on what you're putting up. If it's a marketable portfolio then I believe they do. But some banks will engage in portfolio lending where the "portfolio" is really a collection of assets, some cash, business interests, a rental house, a boat, an RV etc.

You can get a portfolio loan from some lenders. I know Tri-State Capital Bank (https://www.tristatecapitalbank.com/wealth-management.aspx) specializes in lending against portfolios and business interests at mortgage-like rates. You can't get a 30 year note that isn't secured, and you probably won't get anything that's as low as a mortgage either. But if you have a few million in securities and private business interests I don't think it would be much of an issue to get 50% of that as a mortgage. The reason mortgages are cheap is because the government is backing them. Most banks don't hold the mortgages they originate, they just service them. A bank is originating the mortgage and reselling it ridding themselves of the risk. Banks tend to keep the best mortgages on their books. These are ones with lower LTV's, jumbo's that aren't repurchased and loans with good rates. This is why the average maturity for US banks is in the 10 year range yet the majority of the mortgages in the US are 30 years. Very few banks are keeping 30 year paper on their books.

Correct, anyone can sign up. You just need a credit card for the $.10 per page fee or whatever they charge now.

A high end auto buyer isn't getting a subprime auto loan. Not sure how auto lending works in Canada, but in the US very few pay cash or bring their own financing. This means the vast majority 70%+ of car buyers are financing through the dealership. A dealership works with the auto financing group of the manufacturer if it's a new car purchase and generally a bank for used car purchases. Most mainline banks do not originate subprime loans through dealers, instead they just deny credit. You can obtain subprime financing at shady dealers. I think every American knows what I'm talking about, but it's a lower end used car lot. The 'office' is usually in an old mobile home and the cars are of questionable quality. They will have signs "We finance EVERYONE" or "NO CREDIT CHECK REQUIRED" and are in less than desirable parts of town. The financing they're advertising is subprime auto lending. It's a lender like NICK that pushes loans through places like this. These buyers aren't looking at BMW's they're looking at very late model cars. I have two experiences with subprime lending. In 2009 I was looking for a used car and wandered onto a used car lot near us. There were some ok cars and I went inside to find out details and prices. There were no prices posted anywhere on the cars, you could only get them through a salesperson. The salesperson said "hi" and then "how do you expect to pay" I said "I'll be paying cash upfront" and she said "I'm sorry, we don't accept cash buyers here, only buyers who finance through us." I was able to get prices out of her and they were very high. She then told me I was wasting my time because their financing wasn't competitive, it was subprime and rates were high. Worked with a woman who had made a series of bad decisions and had been through two divorces and needed a car. She had a very well paying white collar IT job. She couldn't get traditional financing, had zero cash. Ended up driving an hour north to a lot that guaranteed everyone a car no matter what. Turned out they were a combination of subprime lending with their own additional payments layered on top. It was almost like a rent-to-own subprime type operation. I asked her what sort of car she was looking for and her response was "anything that drives." It's the same reason Aarons or Rent-A-Center doesn't have top of the line brands. The people who are shopping there can't afford them. Maybe Canada's different and you can get a subprime loan from a bank at a dealer. I know one dealer who opened their own self-financed subprime operation themselves. Maybe this is popular in Canada.