Hey everyone!
TEN BANK FAILURES!!!! WOOOHOOO!!! Or rather, WaMu! That's right, the bank who's nickname sounds like a hybrid goat created somewhere in the caves of Pakistan, has now been seized by the feds!
JPMorgan, the hahawegetnoriskthanksunclesam-purchaser of Bear Stearns, has bought up several thousand WaMu branches and billions in their assets.
(50 bucks says they buy Wyoming next)
Anyway, with the economy tanking, Congress has been scrambling to throw somewhere in the range of 700 Billion to buy out the bad CDOs....
...that is after it already:
1) Given JPMorgan a no-risk deal to buy Bear Stearns
2) Sent out $150 Billion in stimulus checks
3) Rescued Fannie Mae and Freddie Mac
4) Rescued AIG
Here's my question...does anybody actually know the percentage of foreclosures? I mean, really, do you?
Here lets do a multiple choice:
A) 10%
B) 20%
C) 30%
D) 40%
The answer is....NONE of the above. The answer is 2%-3%. The problem isn't the number of foreclosures!!! Most of the CDO's are paying near the correct amount of interest. The problem is that no one wants to buy them and so, because they were bought with borrowed money, the value of them needs to be written down, and the banks need more cash to remain what is called "A well-capitalized institution". If the banks had bought these with cash, they could hold onto these CDO's to maturity and just get a constant flow of interest and the principle repayments
So, we need to give $700 Billion dollars to these banks because they made one bad business decision?
NO WAY. NO HOW. NO BAILOUT.
So, how do we restore confidence to the banking system?
Increase FDIC insurance to $1 million/account. Hell, make it $100 million per account.
Insure every dollar in cash that every hard-working American has. This way, even if your bank goes under, you know you'll get your money.
This way people don't keep on causing runs on banks. The banks remain well capitalized institutions and the fear leaves the market. Now, with their deposits run-proofed, the banks have enough time for the CDOs to come to maturity and yield profits.
This will cost MUCH less than 700 Billion. You know, unless like half the united states had the entirety of its savings in WaMu.
(it doesn't)
-Mansij Hans, E.I.T.
Member, Intigril Capital Management.
Disclosure: The other members of Intigril Capital Management do not necessarily share my views on the above proposed bailout discussion.
Friday, September 26, 2008
Saturday, September 20, 2008
Someone! Quick! That squirrel needs a bailout!
Hey everyone,
Anyone else think that the stock market has bipolar syndrome?
...and do you think that Paulson, when he was CEO of Goldman Sachs, ever thought that would end up being the Treasury Secretary during the biggest financial collapse in nearly a century?
Most of the business news media has been discussing whether bailouts are ethical or not and a lot of philosophical questions associated with what has happened over the last few days.
Considering I graduated with a double major in chemical engineering and biology, I'm not interested in discussing philosophy. I want to know what to expect come the opening of international trading on Sunday night (and the opening of the NYSE on Monday morning).
Immediate effects and recent events:
1. Oil
Spiked from its recent low of around $92 all the way back up to $105. Not suprising considering the dollar depreciated about 2% versus the euro.
2. Heavy rallies from the financials - and satellite companies?
However, there was another effect - other non-financial stocks which were heavily shorted also rebounded significantly. Sirius XM is a great example - outperforming the S&P by 15% this week.
3. The miracle company - CapitalOne
I've been extolling the positives of CapitalOne for quite a while now. Their stock - DESPITE NOT BEING ON THE SEC's NEW ILLEGAL SHORTING LIST - SKYROCKETED FROM 46 TO 56! By the way...for those of you who are paying attention - I recommended this stock when it was at 36.
4. I'm Eddie f***ing Lampert.
Eddie Lampert got his first job at Goldman Sachs when he was 15. He was a child genius who became one the best traders on Wall Street. He now owns Sears.
Now, his company's stock is under attack. TWENTY-FIVE PERCENT of outstanding shares were being sold short.
So what does he do?
He says, "I'm Eddie f***ing Lampert" and then...
...proceeds to buy back 4% of shares in THREE MONTHS (normally takes 1-2 YEARS).
The price of the stock goes from 70-ish to 100/share.
Some people shorting his company lose as much as 33%.
Why did he do that?
Because...he's Eddie f***ing Lampert.
**********************************************************************************
So, what does all of this actually mean?
1) Trust the book value. Companies that should not be trading below book values - such as Sears and CapitalOne - are now buys.
2) If you lost money on energy companies recently, I would use the momentary spike in oil prices - and the increased price of oil companies - to sell off the energy companies. Collapsing demand can only be buoyed by the weaker dollar for so long.
3) Covered calls are probably a winning strategy for companies whose only major concern is consumer slowdown. I would be more reluctant to do very specific retail -such as Guess and Ralph Lauren, but I think covered calls on APPL and BBY are probably solid strategies. Don't touch Circuit City or Gamestop. Circuit City is slowly dying and Gamestop is just too risky as their trade in service is starting to upset customers. I think covered calls on pharmaceuticals are a great idea too - especially GSK and SNY are great too. I don't expect the market to be up 30% in the next year or so and a covered call can often net you 30% with only small upward movements of the stock.
I think that's all I have for right now. Keep on reading!
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Anyone else think that the stock market has bipolar syndrome?
...and do you think that Paulson, when he was CEO of Goldman Sachs, ever thought that would end up being the Treasury Secretary during the biggest financial collapse in nearly a century?
Most of the business news media has been discussing whether bailouts are ethical or not and a lot of philosophical questions associated with what has happened over the last few days.
Considering I graduated with a double major in chemical engineering and biology, I'm not interested in discussing philosophy. I want to know what to expect come the opening of international trading on Sunday night (and the opening of the NYSE on Monday morning).
Immediate effects and recent events:
1. Oil
Spiked from its recent low of around $92 all the way back up to $105. Not suprising considering the dollar depreciated about 2% versus the euro.
2. Heavy rallies from the financials - and satellite companies?
However, there was another effect - other non-financial stocks which were heavily shorted also rebounded significantly. Sirius XM is a great example - outperforming the S&P by 15% this week.
3. The miracle company - CapitalOne
I've been extolling the positives of CapitalOne for quite a while now. Their stock - DESPITE NOT BEING ON THE SEC's NEW ILLEGAL SHORTING LIST - SKYROCKETED FROM 46 TO 56! By the way...for those of you who are paying attention - I recommended this stock when it was at 36.
4. I'm Eddie f***ing Lampert.
Eddie Lampert got his first job at Goldman Sachs when he was 15. He was a child genius who became one the best traders on Wall Street. He now owns Sears.
Now, his company's stock is under attack. TWENTY-FIVE PERCENT of outstanding shares were being sold short.
So what does he do?
He says, "I'm Eddie f***ing Lampert" and then...
...proceeds to buy back 4% of shares in THREE MONTHS (normally takes 1-2 YEARS).
The price of the stock goes from 70-ish to 100/share.
Some people shorting his company lose as much as 33%.
Why did he do that?
Because...he's Eddie f***ing Lampert.
**********************************************************************************
So, what does all of this actually mean?
1) Trust the book value. Companies that should not be trading below book values - such as Sears and CapitalOne - are now buys.
2) If you lost money on energy companies recently, I would use the momentary spike in oil prices - and the increased price of oil companies - to sell off the energy companies. Collapsing demand can only be buoyed by the weaker dollar for so long.
3) Covered calls are probably a winning strategy for companies whose only major concern is consumer slowdown. I would be more reluctant to do very specific retail -such as Guess and Ralph Lauren, but I think covered calls on APPL and BBY are probably solid strategies. Don't touch Circuit City or Gamestop. Circuit City is slowly dying and Gamestop is just too risky as their trade in service is starting to upset customers. I think covered calls on pharmaceuticals are a great idea too - especially GSK and SNY are great too. I don't expect the market to be up 30% in the next year or so and a covered call can often net you 30% with only small upward movements of the stock.
I think that's all I have for right now. Keep on reading!
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Tuesday, September 16, 2008
Buy EVERYTHING (also, ICM is awesome)
Hey everyone,
As I'm sure you found my pictorial posts about yesterday's stock market hilarious, I wanted to make the point that the title suggests:
Buy everything on 9/16/2008
(except for energy, financials, and AIG)
Buy some damn index for all I care....sell a kidney to finance it for all I care. Just buy SOMETHING that isn't going to tank. Buy some Best Buy. Buy some Sears. Buy some Apple. Buy some CapitalOne. Buy some Discover Financial Services (Those last two are financials, but I am highly confident about them in the long term).
In reference to Sears, I TOLD YOU SO.
Awhile back, I told you that I was a 100% sure that the S&P would not close below 1,200. Today, it closed at 1,192. I was a whole 0.67% wrong.
After today, you might ask, "Mansij, how is ICM managing its money since they made their first trade on 3/14/2008? I mean, I guess since you were marginally off about your prediction for your bottom, your investments probably aren't doing that well."
The investment decisions made since ICM's first investment on 3/14/2008 to market close on 9/15/2008 have outperformed the S&P average by 8.44%.
I was definetly wrong about the bottom by 0.67%, but I'd rather be wrong about a largely irrelevant metric and up 8.44% than be right about the S&P and be down 95% because I decided to buy Lehman Brothers.
Needless to say, we're all pleased with the results, but much of our strategy is expected to come to fruition in the next six to twelve months, so hopefully we can return even higher by next March and next September.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
As I'm sure you found my pictorial posts about yesterday's stock market hilarious, I wanted to make the point that the title suggests:
Buy everything on 9/16/2008
(except for energy, financials, and AIG)
Buy some damn index for all I care....sell a kidney to finance it for all I care. Just buy SOMETHING that isn't going to tank. Buy some Best Buy. Buy some Sears. Buy some Apple. Buy some CapitalOne. Buy some Discover Financial Services (Those last two are financials, but I am highly confident about them in the long term).
In reference to Sears, I TOLD YOU SO.
Awhile back, I told you that I was a 100% sure that the S&P would not close below 1,200. Today, it closed at 1,192. I was a whole 0.67% wrong.
After today, you might ask, "Mansij, how is ICM managing its money since they made their first trade on 3/14/2008? I mean, I guess since you were marginally off about your prediction for your bottom, your investments probably aren't doing that well."
The investment decisions made since ICM's first investment on 3/14/2008 to market close on 9/15/2008 have outperformed the S&P average by 8.44%.
I was definetly wrong about the bottom by 0.67%, but I'd rather be wrong about a largely irrelevant metric and up 8.44% than be right about the S&P and be down 95% because I decided to buy Lehman Brothers.
Needless to say, we're all pleased with the results, but much of our strategy is expected to come to fruition in the next six to twelve months, so hopefully we can return even higher by next March and next September.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Monday, September 15, 2008
My take on Lehman
Hey everyone,
Here is a little something I've whipped together to describe my sentiments on the Lehman filing for bankruptcy protection:
Thank you. That is all.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management.
Here is a little something I've whipped together to describe my sentiments on the Lehman filing for bankruptcy protection:
Thank you. That is all.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management.
Saturday, September 13, 2008
Why Boeing Doesn't Need 18 Billion Dollars Right Now
Hey everyone,
Right now 27, 250 unionized machinists at Boeing have been on strike for about a week. The union has 140 million in the bank to support striking workers - a 6 month supply - and analysts are estimating that each day the machinists are not at work, Boeing has 100 million dollars of deffered revenue. That is, Boeing cannot charge its customers 100 million dollars each day that the workers are on strike. Therefore
30 days/month * 6 months * 100 million defferred revenue/ day = 18,000 million = 18 billion in deffered revenue
Now, I'm not categorically anti-union. I don't want to see worker's conditions like we had in the days of Andrew Carnegie. However, Boeing is in a situation which it cannot, under any circumstances, allow these workers to get what they want. Airbus, once an afterthough, is straining Boeing. Northrup Grumman is also voraciously fighting for that $35 Billion tanker deal that should have been a shoe-in for Boeing. The airline industry and the military needs new planes at a time they cannot afford them. Boeing is fighting for its place as the undisputed leader in aviation design.
Now, details of who wants what are confidential, so for all I know, Boeing could be wanting to cut workers pay by 50% and be asking for the sacrifice of their first born child. But I doubt they are. I would be suprised Boeing could be that heartless.
Striking during this time when Boeing's standing in its industry is under attack is unethical on the part of the workers. They should continue to be working on their old contract while working towards a new one. If Boeing had gotten the $35 Billion tanker deal, I'd probably be okay with the workers striking. But with the frequent delays on the new 787 dreamliner and the nebuluous state of that tanker deal, the workers need to invest in their own company.
How?
Agree to the old contract until the first 787 Dreamliner is produced.
Everyone knows that the new 787 Dreamliner will destroy Airbus' market share. Tell Boeing they'll accept their old contract until the unions crank out the long delayed dreamliner. Then, when the first 787 dreamliner comes out they get a bigger increase than they otherwise would have gotten. This allows Boeingto become an effective competitor with Airbus and Northrup Grumman and the workers show they care about Boeing, not their own salaries.
Unless of course the workers don't care about Boeing.
If you want a viable business, you need to be willing to compete. The workers don't want Boeing to meet the challege that Airbus and Northrup has given them.
These workers don't deserve to call themselves Boeing employees.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Disclosure: My views on the Boeing Machinist Union strike do not necessarily reflect the views of the other members of Intigril Capital Management.
Right now 27, 250 unionized machinists at Boeing have been on strike for about a week. The union has 140 million in the bank to support striking workers - a 6 month supply - and analysts are estimating that each day the machinists are not at work, Boeing has 100 million dollars of deffered revenue. That is, Boeing cannot charge its customers 100 million dollars each day that the workers are on strike. Therefore
30 days/month * 6 months * 100 million defferred revenue/ day = 18,000 million = 18 billion in deffered revenue
Now, I'm not categorically anti-union. I don't want to see worker's conditions like we had in the days of Andrew Carnegie. However, Boeing is in a situation which it cannot, under any circumstances, allow these workers to get what they want. Airbus, once an afterthough, is straining Boeing. Northrup Grumman is also voraciously fighting for that $35 Billion tanker deal that should have been a shoe-in for Boeing. The airline industry and the military needs new planes at a time they cannot afford them. Boeing is fighting for its place as the undisputed leader in aviation design.
Now, details of who wants what are confidential, so for all I know, Boeing could be wanting to cut workers pay by 50% and be asking for the sacrifice of their first born child. But I doubt they are. I would be suprised Boeing could be that heartless.
Striking during this time when Boeing's standing in its industry is under attack is unethical on the part of the workers. They should continue to be working on their old contract while working towards a new one. If Boeing had gotten the $35 Billion tanker deal, I'd probably be okay with the workers striking. But with the frequent delays on the new 787 dreamliner and the nebuluous state of that tanker deal, the workers need to invest in their own company.
How?
Agree to the old contract until the first 787 Dreamliner is produced.
Everyone knows that the new 787 Dreamliner will destroy Airbus' market share. Tell Boeing they'll accept their old contract until the unions crank out the long delayed dreamliner. Then, when the first 787 dreamliner comes out they get a bigger increase than they otherwise would have gotten. This allows Boeingto become an effective competitor with Airbus and Northrup Grumman and the workers show they care about Boeing, not their own salaries.
Unless of course the workers don't care about Boeing.
If you want a viable business, you need to be willing to compete. The workers don't want Boeing to meet the challege that Airbus and Northrup has given them.
These workers don't deserve to call themselves Boeing employees.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Disclosure: My views on the Boeing Machinist Union strike do not necessarily reflect the views of the other members of Intigril Capital Management.
Friday, September 12, 2008
Layman...oops, I mean LEHman.
Hey everyone,
I was worried as I drafted this article about Lehman that there would be a concluding development around whoever the heck decides that a share of Lehman is worth more than an extra large value meal at McDonald's. But, oh well, here goes:
So, for the whole year Lehman has constantly been saying, "We're fine, we're fine, we've got tons of cash."
What they neglected to emphazie is that the still have 42 Billion in subprime CDOs.
So, of course, they said on Wednesday, we'll sell part of us, and that'll make people feel better!
- Apparently, it made people feel so good the stock dropped 40%.
Then on Thursday they say, "Okay, Okay, we'll sell all of us"
- That made people feel so good, the stock dropped ANOTHER 30%
Paulson then says that he will not bailout Lehman.
- The stock drops another 10%.
The CEO orders chicken salad for lunch.
- Stock goes up 2%.
My favorite part happened after Lehman said they wanted to sell the whole company:
Goldman Sachs, about 5 minutes after Lehman's annoucement, has an anonymous source through some news publication say that they have no interest in Lehman.
Prefontaine couldn't have run away that fast from Lehman.
But seriously, there is something odd going on with the share value of Lehman. As recently as a week ago, Lehman was believed to be valued at between 8 and 10 billion. This is the value of their Neuremburger unit- which is their super-excellent investment banking arm....and has been generally accepted as the value by analysts and investors. Therefore, Lehman should cost between $11.50 and $14.50 per share.
As of 12:18 pm on 09/12/2008, it is trading at $3.55 - a total value of 2.47 Billion.
Now, a week ago, I would have been shorting Lehman...but at this valuation - it seems the right thing to do is to BUY Lehman. Unless there is some magical reason that the value of all the CDOs has magically changed by as much as 7.5 BILLION dollars in the last week. The other factor which makes me think that Lehman may be undervalued - and that is what led to the purchase price of Bear Stearns being raised from $2 per share to $10 per share. Bear Stearns, like Lehman has much of its shares held by employees. Therefore, the employees are much more likely to argue for a 8 to 10 billion valuation.
One critical difference though.
JP Morgan's buyout of Bear Stearns was backed by the federal government and, as Treasury Secretary Paulson said, Lehman's may not be. Therefore, its not exactly the same low cost situation for any potential Lehman buyer...and that's the big risk anyone who buys Lehman stock is taking. A buyer could argue that with Lehman's leveraged position - the total assets Lehman owns when sold cannot cover the money borrowed to purchase them. Without federal backing - no bank is willing to take what has a reasonable potential to amount to a severe loss.
Honestly, I think Lehman should just default on the debt. The more deflation we have, the lower gas prices go. I'm always a fan of that.
-Mansij Hans
Member, Intigril Capital Management
I was worried as I drafted this article about Lehman that there would be a concluding development around whoever the heck decides that a share of Lehman is worth more than an extra large value meal at McDonald's. But, oh well, here goes:
So, for the whole year Lehman has constantly been saying, "We're fine, we're fine, we've got tons of cash."
What they neglected to emphazie is that the still have 42 Billion in subprime CDOs.
So, of course, they said on Wednesday, we'll sell part of us, and that'll make people feel better!
- Apparently, it made people feel so good the stock dropped 40%.
Then on Thursday they say, "Okay, Okay, we'll sell all of us"
- That made people feel so good, the stock dropped ANOTHER 30%
Paulson then says that he will not bailout Lehman.
- The stock drops another 10%.
The CEO orders chicken salad for lunch.
- Stock goes up 2%.
My favorite part happened after Lehman said they wanted to sell the whole company:
Goldman Sachs, about 5 minutes after Lehman's annoucement, has an anonymous source through some news publication say that they have no interest in Lehman.
Prefontaine couldn't have run away that fast from Lehman.
But seriously, there is something odd going on with the share value of Lehman. As recently as a week ago, Lehman was believed to be valued at between 8 and 10 billion. This is the value of their Neuremburger unit- which is their super-excellent investment banking arm....and has been generally accepted as the value by analysts and investors. Therefore, Lehman should cost between $11.50 and $14.50 per share.
As of 12:18 pm on 09/12/2008, it is trading at $3.55 - a total value of 2.47 Billion.
Now, a week ago, I would have been shorting Lehman...but at this valuation - it seems the right thing to do is to BUY Lehman. Unless there is some magical reason that the value of all the CDOs has magically changed by as much as 7.5 BILLION dollars in the last week. The other factor which makes me think that Lehman may be undervalued - and that is what led to the purchase price of Bear Stearns being raised from $2 per share to $10 per share. Bear Stearns, like Lehman has much of its shares held by employees. Therefore, the employees are much more likely to argue for a 8 to 10 billion valuation.
One critical difference though.
JP Morgan's buyout of Bear Stearns was backed by the federal government and, as Treasury Secretary Paulson said, Lehman's may not be. Therefore, its not exactly the same low cost situation for any potential Lehman buyer...and that's the big risk anyone who buys Lehman stock is taking. A buyer could argue that with Lehman's leveraged position - the total assets Lehman owns when sold cannot cover the money borrowed to purchase them. Without federal backing - no bank is willing to take what has a reasonable potential to amount to a severe loss.
Honestly, I think Lehman should just default on the debt. The more deflation we have, the lower gas prices go. I'm always a fan of that.
-Mansij Hans
Member, Intigril Capital Management
Wednesday, September 10, 2008
A slippery, oily slope.
Hey everyone,
I had to refresh my browser....repeatedly...when I saw that OPEC is cutting oil production.
Cutting production by Five hundred thousand barrels a day:
500,000 barrels *42 gallons/ barrel = 21 million gallons of crude per day.
However, despite the temporary price pump, I can understand why they are doing it.
It goes back (a whopping 48 hours) to Fannie and Freddie. If the US currency stabilizes or appreciates - the non-US demand for oil decreases. Oil is traded in dollars (except in Iran) and therefore appreciation in the dollar increases the price of oil to people in countries that don't use the dollar.
Let me explain this further - if you are a Brazillian company and you want to buy oil on the open market you need to take your Brazillian Reals (pronounced ray-ALS) buy US dollars and then buy the oil contract. If the US dollar appreicates, it takes more Reals to buy enough US dollars to buy a full contract. Therefore, you see a higher price and are less likely to buy oil.
Now, the most critical reason why production was cut in an effort to temporarily boost prices or stem the decline is any country that SELLS oil in currencies other than the dollar makes less money when the dollar appreciates.
So, if you are Iran, the only country which doesn't sell oil using the US dollar AND the traditional price hawk, you are going to do everything in your power to keep the price of oil as high as you can. Normally, OPEC votes with Saudi Arabia. This time, Iran, Algeria, and Venezula must have had enough push to override the Kingdom. Algeria has nothing except oil and Venezula's Chavez needs to prove to people that he is willing to fight for higher oil prices which basically keep him viewed positively by the poor - who were the source of his rise to power. Put this all together and you have an output cut on your hands.
Yet...oil seems to be holding around $104 (@ 1 AM EST 9/10/2008) in international trading. But with the dollar still having room to appreciate...OPEC is probably wishing they kept prices at $70 and didn't encourgae every American to dump their SUV.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
I had to refresh my browser....repeatedly...when I saw that OPEC is cutting oil production.
Cutting production by Five hundred thousand barrels a day:
500,000 barrels *42 gallons/ barrel = 21 million gallons of crude per day.
However, despite the temporary price pump, I can understand why they are doing it.
It goes back (a whopping 48 hours) to Fannie and Freddie. If the US currency stabilizes or appreciates - the non-US demand for oil decreases. Oil is traded in dollars (except in Iran) and therefore appreciation in the dollar increases the price of oil to people in countries that don't use the dollar.
Let me explain this further - if you are a Brazillian company and you want to buy oil on the open market you need to take your Brazillian Reals (pronounced ray-ALS) buy US dollars and then buy the oil contract. If the US dollar appreicates, it takes more Reals to buy enough US dollars to buy a full contract. Therefore, you see a higher price and are less likely to buy oil.
Now, the most critical reason why production was cut in an effort to temporarily boost prices or stem the decline is any country that SELLS oil in currencies other than the dollar makes less money when the dollar appreciates.
So, if you are Iran, the only country which doesn't sell oil using the US dollar AND the traditional price hawk, you are going to do everything in your power to keep the price of oil as high as you can. Normally, OPEC votes with Saudi Arabia. This time, Iran, Algeria, and Venezula must have had enough push to override the Kingdom. Algeria has nothing except oil and Venezula's Chavez needs to prove to people that he is willing to fight for higher oil prices which basically keep him viewed positively by the poor - who were the source of his rise to power. Put this all together and you have an output cut on your hands.
Yet...oil seems to be holding around $104 (@ 1 AM EST 9/10/2008) in international trading. But with the dollar still having room to appreciate...OPEC is probably wishing they kept prices at $70 and didn't encourgae every American to dump their SUV.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Tuesday, September 9, 2008
Apple's Big Presentation
Hey everyone,
I already have a post up for Tuesday - see below - but I've been reading endless speculation about what the big Apple presentation is going to come up with. So, I thought I would add my own thoughts. Here we go:
1) A 4G iPhone. It has faster internet and the cure for cancer.
2) A music subscription service - and for an additional fee - a direct line with God.
3) Apple TV. That sounds like a can't miss idea...right?
My point with the above sarcasm above is that you should forget the speculation and tune out the noise. Apple is a great company. Its stock is going to do well over the next few years. It doesn't matter what happens today. Apple stock is a buy.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management.
Note: I do think that they will unveil a music subscription service. The Ipod is their least profitable segment. They need a way to amplify it's earnings. A subscription service is the best way to do it.
Additional Notice: My views on Apple do not necessarily reflect the views of other members of Intigril Capital Management.
I already have a post up for Tuesday - see below - but I've been reading endless speculation about what the big Apple presentation is going to come up with. So, I thought I would add my own thoughts. Here we go:
1) A 4G iPhone. It has faster internet and the cure for cancer.
2) A music subscription service - and for an additional fee - a direct line with God.
3) Apple TV. That sounds like a can't miss idea...right?
My point with the above sarcasm above is that you should forget the speculation and tune out the noise. Apple is a great company. Its stock is going to do well over the next few years. It doesn't matter what happens today. Apple stock is a buy.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management.
Note: I do think that they will unveil a music subscription service. The Ipod is their least profitable segment. They need a way to amplify it's earnings. A subscription service is the best way to do it.
Additional Notice: My views on Apple do not necessarily reflect the views of other members of Intigril Capital Management.
Analysts Go Googly Eyed.
Hey everyone,
As expected the stock market rallied yesterday. However, Google dropped from $452/share at open to 420/share at close - underperforming the Nasdaq by 6%. Actually, since the Nasdaq is weighted by market capitalization, Google's decline likely represented one of the reasons why the Dow Jones was up 2.6% while the Nasdaq was up only 0.6%.
Anyway, every business journalist, analyst, investment bank, and underground troll was trying to explain why Google was declining. Here are the reasons below (and why they are wrong) :
1) The dollar is getting stronger so Google makes less off its international business
- This is been happening for about 2 months now. You don't honestly believe that traders decided to make that their excuse to sell today, do you?
2) They are vulnerable to the consumer slowdown.
- Ummm....we've know that for awhile, the current Fannie and Freddie take over only make the consumer slowdown less likely to become a depression, so this isn't the reason.
3) Multiple Contraction - That is, people are speculating in it less because they don't think its going to have high growth - this is related in part to the consumer slowdown rationale above
- Multiple Contraction is really how financial journalists say, "We have no idea what is going on"
So what is the real reason why Google dropped today when everything else was rallying?
A press release from the association of national advertisers - an organization which represents a lot of big companies - Coca-Cola, Exxon, etc. - saying that it strongly opposes the Yahoo-Google advertising alliance
Its funny, yesterday on the ICM conference call, I was talking about how Google seems to be immune from prosecution from anti-trust because the product it offers is free to consumers. Google has somehow managed to look like a benevolent organization which offers all of its products free to consumers. I thought, unless businesses bind together and work against Google, this search company can have a defacto monopoly.
Now, Google needs to hire lobbyists. Lobbyists will make them look bad. Google and Apple have been able to maintain their clean image because they haven't gone to court over anything. While privacy issues have come about, Google has never really had to fight for marketshare in the courts. They've only use their engineering abilities to steal that from Yahoo. Now, when they start using legal efforts - they become "the man". This is bad press for Google. Perhaps they will be able to shrug off the critisim, but its not guaranteed. Even Apple and Steve Jobs were able to get out of the options back-dating issue relatively unscathed. But that's probably because no one understands what options backdating IS.
Everyone knows what a lobbyist is. Everyone knows what the word "Antitrust" means. When they get associated with Google....then Google becomes evil. Google becomes Goliath.
People pay a huge premium for Macs even though their functionality is no better than a PC. Sure they might have a shiny interface, but deep down, they are all the same. Google is much the same way. Maybe the search results are a little better, but in the grand scheme of things, you pretty much find what you want with Yahoo or MSN or Ask.com. But if you make Google look evil - the dedicated anti-"The man" fan base may start moving away.
That's why Google stock went down. Not "multiple contraction"
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Disclosure: Intigril Capital Management in long Microsoft at the time of publication of "Analysts Go Googly Eyed"
As expected the stock market rallied yesterday. However, Google dropped from $452/share at open to 420/share at close - underperforming the Nasdaq by 6%. Actually, since the Nasdaq is weighted by market capitalization, Google's decline likely represented one of the reasons why the Dow Jones was up 2.6% while the Nasdaq was up only 0.6%.
Anyway, every business journalist, analyst, investment bank, and underground troll was trying to explain why Google was declining. Here are the reasons below (and why they are wrong) :
1) The dollar is getting stronger so Google makes less off its international business
- This is been happening for about 2 months now. You don't honestly believe that traders decided to make that their excuse to sell today, do you?
2) They are vulnerable to the consumer slowdown.
- Ummm....we've know that for awhile, the current Fannie and Freddie take over only make the consumer slowdown less likely to become a depression, so this isn't the reason.
3) Multiple Contraction - That is, people are speculating in it less because they don't think its going to have high growth - this is related in part to the consumer slowdown rationale above
- Multiple Contraction is really how financial journalists say, "We have no idea what is going on"
So what is the real reason why Google dropped today when everything else was rallying?
A press release from the association of national advertisers - an organization which represents a lot of big companies - Coca-Cola, Exxon, etc. - saying that it strongly opposes the Yahoo-Google advertising alliance
Its funny, yesterday on the ICM conference call, I was talking about how Google seems to be immune from prosecution from anti-trust because the product it offers is free to consumers. Google has somehow managed to look like a benevolent organization which offers all of its products free to consumers. I thought, unless businesses bind together and work against Google, this search company can have a defacto monopoly.
Now, Google needs to hire lobbyists. Lobbyists will make them look bad. Google and Apple have been able to maintain their clean image because they haven't gone to court over anything. While privacy issues have come about, Google has never really had to fight for marketshare in the courts. They've only use their engineering abilities to steal that from Yahoo. Now, when they start using legal efforts - they become "the man". This is bad press for Google. Perhaps they will be able to shrug off the critisim, but its not guaranteed. Even Apple and Steve Jobs were able to get out of the options back-dating issue relatively unscathed. But that's probably because no one understands what options backdating IS.
Everyone knows what a lobbyist is. Everyone knows what the word "Antitrust" means. When they get associated with Google....then Google becomes evil. Google becomes Goliath.
People pay a huge premium for Macs even though their functionality is no better than a PC. Sure they might have a shiny interface, but deep down, they are all the same. Google is much the same way. Maybe the search results are a little better, but in the grand scheme of things, you pretty much find what you want with Yahoo or MSN or Ask.com. But if you make Google look evil - the dedicated anti-"The man" fan base may start moving away.
That's why Google stock went down. Not "multiple contraction"
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Disclosure: Intigril Capital Management in long Microsoft at the time of publication of "Analysts Go Googly Eyed"
Monday, September 8, 2008
Kicked in the Fannie, the economy Mae now recover.
Hey everyone,
I'm not sure if the title of this article is terribly clever or horrendously terrible.
I'm going to go with horrendously terrible.
Anyway, the government now owns 79.9% of both Fannie Mae and Freddie Mac via preferred stock. Basically, if you own common shares....over the last year your share value went from somewhere around being worth 20 gallons of gas($80ish) to...ummm...does a sub-nano penny stock listing exist?
On the positive side - the stock market is going to rally on Monday. Asian markets opening on Sunday night are rallying a colossal three and a half percent. I expect that the European markets will rally as well on Monday morning. I think there is some short term risk to the dollar - but likely it will be incredibly short term - think a week or two. Oil will likely stabilize between 105-110 over the same time period. By buying out Fannie Mae and Freddie Mac the government did technically increase liquidity and devalue the US dollar. However, because this is in a much more defined arena - and not a more broad action like a rate cut - we shouldn't see too much negative pressure on the dollar or upward price pressure on oil.
I suppose there are some people that might critize this move as far too interventionist. While I agree with them on prinicple...I disagree with such critics on reasonability of such policy. The american economy is not a business like the corner deli or even an international conglomerate like General Electric. The focus of the economy and those who regulate it is a basic quality of live for everyone (well, let's hope that's their goal). Businesses don't have the same aims. So running a business and regulating the economy shouldn't be dealt with using the same principles and methods. Letting a company go under because they couldn't understand what their customers wanted is acceptable (Think American Automakers).
But punishing future Americans for the poor decisions of today is irresponsible.
Americans have been punished enough. The point has been proven. I don't think people are going to forget this travesty that easily. It wasn't only a consumer slowdown like in 2001. It was high food and gas prices, inability to obtain student loans, 6.1% unemployment, declining home values, and unbelievable inflation. Punishing the American public for a huge cascade which was amplified by a few banking institutions refusing to do due dillegence is unfair and unnecessary.
Like I said a long time ago - the credit crisis is a consumer problem, and the take over of Fannie Mae and Freddie Mac, will ensure the bedrock of consumer strength - home equity- is preserved.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Anyway, the government now owns 79.9% of both Fannie Mae and Freddie Mac via preferred stock. Basically, if you own common shares....over the last year your share value went from somewhere around being worth 20 gallons of gas($80ish) to...ummm...does a sub-nano penny stock listing exist?
On the positive side - the stock market is going to rally on Monday. Asian markets opening on Sunday night are rallying a colossal three and a half percent. I expect that the European markets will rally as well on Monday morning. I think there is some short term risk to the dollar - but likely it will be incredibly short term - think a week or two. Oil will likely stabilize between 105-110 over the same time period. By buying out Fannie Mae and Freddie Mac the government did technically increase liquidity and devalue the US dollar. However, because this is in a much more defined arena - and not a more broad action like a rate cut - we shouldn't see too much negative pressure on the dollar or upward price pressure on oil.
I suppose there are some people that might critize this move as far too interventionist. While I agree with them on prinicple...I disagree with such critics on reasonability of such policy. The american economy is not a business like the corner deli or even an international conglomerate like General Electric. The focus of the economy and those who regulate it is a basic quality of live for everyone (well, let's hope that's their goal). Businesses don't have the same aims. So running a business and regulating the economy shouldn't be dealt with using the same principles and methods. Letting a company go under because they couldn't understand what their customers wanted is acceptable (Think American Automakers).
But punishing future Americans for the poor decisions of today is irresponsible.
Americans have been punished enough. The point has been proven. I don't think people are going to forget this travesty that easily. It wasn't only a consumer slowdown like in 2001. It was high food and gas prices, inability to obtain student loans, 6.1% unemployment, declining home values, and unbelievable inflation. Punishing the American public for a huge cascade which was amplified by a few banking institutions refusing to do due dillegence is unfair and unnecessary.
Like I said a long time ago - the credit crisis is a consumer problem, and the take over of Fannie Mae and Freddie Mac, will ensure the bedrock of consumer strength - home equity- is preserved.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Sunday, September 7, 2008
Why the American Automakers Should Go Bankrupt.
(Yes, I know about the current developments around Fannie and Freddie, but the federal government has yet to outline exactly what is going on, so I want to hold off until I have the full details before I provide my 2 pence on whatever is going on.)
Hey everyone,
Despite ICM being long MSFT, I love Yahoo. Not the company, but the website. They have great content. One of the superb articles that I ran across this week was a discussion about the new features that the 2009 cars will have. Much of the article discusses safety features such as emergency brake assist, blind-spot detection, and forward collision warnings.
However, all the safety features discussed in the article, there was only one being considered by a domestic automaker - the adaptive cruise control. This was being considered by Chrysler.
The second half of the article talked about some features that were being put into cars and trucks. What is Ford doing?
They are putting in a refrigerator. That's right. A refrigerator that is big enough to hold a lunch and a few bottles of water.
Ignore the pathetic fuel efficiency. Ignore safety. Ignore common sense. Put in a refigerator.
Nissan is coming up with paint that repairs scratches by itself. Now that's pretty cool. What does Ford do to answer that?
A tool monitoring system on its trucks. No, I'm not joking. You see, you register your tools with RFID tags and the truck keeps track of what tools are in your truck.
To those of you who think this is a good idea - I'm a chemical engineer at a chemical plant which uses trucks for hauling and what they were actually built for. I work with operators who spend $35,000 on trucks which serve as their family vehicles. But I know that none of them are going to be motivated to tag every one of their tools with RFID tags. Why?
1) Because the RFID tags on the tools would be constantly damaged
2) Tools are expensive. They keep track of them like crazy already.
3) You might alter the ergomics of the tool with the RFID tag - smaller tools like screwdrivers have grips which become uncomfortable to hold with RFID tags on them.
One could reasonably argue that such a system might spur an impulse buy amongst people who have tools and are interested in purchasing trucks.
Trucks - especially considering their low gas mileage and high price - are not impulse buys. Getting a truck is a big image issue amongst truck owners. Power, speed, features are closely compared. So someone who sees a more powerful truck for the same money as a less powerful truck with this RFID system is likely going to take the more powerful truck.
So, when the whole world is worried about high gas prices and has always worried about safety on the road, american automakers automakers worry about fridges and RFID tools. They don't DESERVE a bailout.
-Mansij Hans, E.I.T
Member, Intigril Capital Management
Disclosure: Mansij Hans' first car was an American car. It was a '97 Dodge Intrepid and he loved it to death. He now drives a Nissan.
Hey everyone,
Despite ICM being long MSFT, I love Yahoo. Not the company, but the website. They have great content. One of the superb articles that I ran across this week was a discussion about the new features that the 2009 cars will have. Much of the article discusses safety features such as emergency brake assist, blind-spot detection, and forward collision warnings.
However, all the safety features discussed in the article, there was only one being considered by a domestic automaker - the adaptive cruise control. This was being considered by Chrysler.
The second half of the article talked about some features that were being put into cars and trucks. What is Ford doing?
They are putting in a refrigerator. That's right. A refrigerator that is big enough to hold a lunch and a few bottles of water.
Ignore the pathetic fuel efficiency. Ignore safety. Ignore common sense. Put in a refigerator.
Nissan is coming up with paint that repairs scratches by itself. Now that's pretty cool. What does Ford do to answer that?
A tool monitoring system on its trucks. No, I'm not joking. You see, you register your tools with RFID tags and the truck keeps track of what tools are in your truck.
To those of you who think this is a good idea - I'm a chemical engineer at a chemical plant which uses trucks for hauling and what they were actually built for. I work with operators who spend $35,000 on trucks which serve as their family vehicles. But I know that none of them are going to be motivated to tag every one of their tools with RFID tags. Why?
1) Because the RFID tags on the tools would be constantly damaged
2) Tools are expensive. They keep track of them like crazy already.
3) You might alter the ergomics of the tool with the RFID tag - smaller tools like screwdrivers have grips which become uncomfortable to hold with RFID tags on them.
One could reasonably argue that such a system might spur an impulse buy amongst people who have tools and are interested in purchasing trucks.
Trucks - especially considering their low gas mileage and high price - are not impulse buys. Getting a truck is a big image issue amongst truck owners. Power, speed, features are closely compared. So someone who sees a more powerful truck for the same money as a less powerful truck with this RFID system is likely going to take the more powerful truck.
So, when the whole world is worried about high gas prices and has always worried about safety on the road, american automakers automakers worry about fridges and RFID tools. They don't DESERVE a bailout.
-Mansij Hans, E.I.T
Member, Intigril Capital Management
Disclosure: Mansij Hans' first car was an American car. It was a '97 Dodge Intrepid and he loved it to death. He now drives a Nissan.
Saturday, September 6, 2008
Shorts - Not just for the weekend barbeque.
Hey everyone,
I can't tell you how sick I am about hearing about how evil people who short sell stocks are. Apparently, its okay to think a company is going to appreciate in value...but oh no!
Companies can't decrease in value!
You shouldn't make money over their demise! That's terrible!
I'm just jealous that you weren't mesmerized by constant refrains of buy and hold like I was!
If it weren't for the short sellers, the stock market would have made me a TRILLION BILLION GAZILLION dollars by now!
These incredibly narrow-minded attacks towards short sellers are simply people venting about the fact that they couldn't see the crash before it happened.
What happened to their glamorization of Warren Buffett? What happened to riding out the drops and enjoying the bumps?
My point in all the above sarcasm is that betting that a stock is going down is just as legitimate as betting a stock will go up. Plenty of traders use margin (def : borrowed money) to buy shares, betting that they will appreciate and they can pay back the loan.
What is the moral difference between borrowing stock to sell as opposed to borrowing money to buy stock? I can't see one.
The stock market isn't about making a point or proving a new statistical analysis tool. Its about MONEY. Its about profiting off of the rise AND FALL of companies. Or betting on the rise and fall of the economy of the United States.
Stop complaining about short sellers. It doesn't make your returns any better.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
I can't tell you how sick I am about hearing about how evil people who short sell stocks are. Apparently, its okay to think a company is going to appreciate in value...but oh no!
Companies can't decrease in value!
You shouldn't make money over their demise! That's terrible!
I'm just jealous that you weren't mesmerized by constant refrains of buy and hold like I was!
If it weren't for the short sellers, the stock market would have made me a TRILLION BILLION GAZILLION dollars by now!
These incredibly narrow-minded attacks towards short sellers are simply people venting about the fact that they couldn't see the crash before it happened.
What happened to their glamorization of Warren Buffett? What happened to riding out the drops and enjoying the bumps?
My point in all the above sarcasm is that betting that a stock is going down is just as legitimate as betting a stock will go up. Plenty of traders use margin (def : borrowed money) to buy shares, betting that they will appreciate and they can pay back the loan.
What is the moral difference between borrowing stock to sell as opposed to borrowing money to buy stock? I can't see one.
The stock market isn't about making a point or proving a new statistical analysis tool. Its about MONEY. Its about profiting off of the rise AND FALL of companies. Or betting on the rise and fall of the economy of the United States.
Stop complaining about short sellers. It doesn't make your returns any better.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
Monday, September 1, 2008
What we might do next.
Hey everyone,
I was watching oil prices march to my standing prediction this weekend in international trading after Gustav was downgraded to a Category 1, and I thought to myself:
What next?
Since I called a bottom a week or so ago, I'm ready to buy up some more stocks. But the problem is that I'm impatient. I want higher returns now. I could probably getting back into day trading for a week or two if I were so inclined, but since I started this hedge fund, I try to keep myself in a value investing mindset.
Anyway, someone from my high school contacted me a few days ago asking about a few stocks and indicated he had written a covered call for his picks.
While I really didn't like his picks, his use of covered calls in this environment was exactly right.
Why?
When the market drops, it drops like a rock. But a recovery will occur of an extended over a period of time. A covered call provides some protection if the stock price goes down AND if the market flounders for awhile. The only additional risk that he is taking beyond the standard market crash scenario- is that if the market rises fast he'll misses out on making more money than if he hadn't taken a covered call strategy.
Tomorrow, on ICM's conference call, I'm going pitch to the other members that we explore the covered call strategy on some fundamentally strong companies.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
I was watching oil prices march to my standing prediction this weekend in international trading after Gustav was downgraded to a Category 1, and I thought to myself:
What next?
Since I called a bottom a week or so ago, I'm ready to buy up some more stocks. But the problem is that I'm impatient. I want higher returns now. I could probably getting back into day trading for a week or two if I were so inclined, but since I started this hedge fund, I try to keep myself in a value investing mindset.
Anyway, someone from my high school contacted me a few days ago asking about a few stocks and indicated he had written a covered call for his picks.
While I really didn't like his picks, his use of covered calls in this environment was exactly right.
Why?
When the market drops, it drops like a rock. But a recovery will occur of an extended over a period of time. A covered call provides some protection if the stock price goes down AND if the market flounders for awhile. The only additional risk that he is taking beyond the standard market crash scenario- is that if the market rises fast he'll misses out on making more money than if he hadn't taken a covered call strategy.
Tomorrow, on ICM's conference call, I'm going pitch to the other members that we explore the covered call strategy on some fundamentally strong companies.
-Mansij Hans, E.I.T.
Member, Intigril Capital Management
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