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OT D 'n' R
I agree that race isn't conquered while it remains a common excuse for or against a candidate.
I found myself voting all over the board. In particular, I voted against a couple of judges who were sucking up county salaries to sit around looking good while declining to do any work and voted for some who took their jobs seriously, prepared for hearings, and made rulings based on the law and not on whimsy. In a couple of cases (not judges) I voted for Libertarians when I didn't know anything favorable about the other candidates.
I have a suspicion that the Dems will be no stronger in doing good for the country than Reps when tempted with the power to do whatever they please with both houses of Congress and the Presidential Mansion. I hope very much to be pleasantly surprised. I expect, however, that many people ecstatic that the Second Coming was upon us earlier this week will return to their apathetic and disillusioned prior state in the fullness of time.
I do hope I'm guilty of excess cynicism rather than being gifted with insight.
Take care,
--Tex.
OT Rosa Parks
Actually, Rosa Parks didn't have to suffer that. Mrs. DeCuir obtained a $1,000 judgment in the 1870s from a New Orleans court when she was discriminated against by a steamboat operator on the basis of her race (he would not rent her the upstairs "white cabin"), but her verdict was overturned (after being sustained on appeal through the Louisiana Supreme Court) by the United States Supreme Court, which dictated to the Southern states the formula they later enacted to re-institutionalize racial discrimination in a way the Supreme Court explicitly said would pass Constitutional muster.
http://jadedconsumer.blogspot.com/2008/07/meaning-of-emancipation-proclamation.html
Given the speed with which we got from the 1964 Act to a Black president, what does this say about the lost opportunity caused by Hall v. DeCuir and the 90 years we lost in the fight for equality, all courtesy of a Supreme Court that claimed the dormant Commerce Clause should be allowed to stop state regulation of morals?
Take care,
--Tex.
no Pystar settlement:
http://www.macnn.com/articles/08/11/03/apple.psystar.set.date/
With a new trial date in the works, it looks like ADR didn't end the litigation. Pystar's new product launch isn't the result of a settlement, it's an escalation tactic.
With respect to clickwrap agreements and EULAs, I think a consumer who buys a shrinkwrapped box with a disc in it, without advance notice of the EULA or its crazy terms, is in a vastly different position than a for-profit competitor, operating with the benefit of the advice of counsel and the opportunity to consider all the agreements involved in the transaction well in advance, who seeks to leverage someone else's IP to make a profit. Little consumers have an ally in arguments like adhesion contracts, notice, etc. -- but a commercial competitor who doesn't want to bother to buy an OEM license for someone else's software doesn't raise the same sympathies, and I would readily imagine such parties as Pystar discovering the agreements are worth something -- at least against parties like Pystar.
Take care,
--Tex.
re the security threat of competitors
Either:
(a) the competitors are writing code to embarrass MSFT, or
(b) the competitors are drawing attention to all the code that should embarrass MSFT, so people notice and MSFT indeed is embarrassed.
I think (b) is the more likely threat to MSFT posed by competitors. Without (b), MSFT would not care a whit for the injury sustained by its dupes (er, customers) by reason of MSFT's poor application and operating system security.
I saw a graph a few years ago that depicted the interrelation of system calls in a couple of different operating systems, and Microsoft's operating system was depicted as having a vastly larger number of interfaces -- indicating greater code complexity, and more opportunity for failure. MSFT's preference to retain backward compatibility (to retain the ability to use application lock to keep customers across upgrade cycles) rather than to fix architectural problems seems a longstanding issue. Hypothetically, emulated "old Windows" could be adequately fast for old code on new hardware, though, so that a genuine rewrite could be accomplished. I just haven't seen MSFT manage a project that large successfully, though.
On the other hand, their ad campaign always works: people always know there's a new Microsoft Windows to suffer.
Take care,
--Tex.
re production
Trying to use launch-quarter numbers to estimate normal sales seems a rough road in light of the enormous number of outlets whose channel needed filling in addition to the pent-up demand left by the 2G supply shortage pre-launch. I expect that the December quarter will be heavily back-end loaded, though: people who've not been buying due to financial crisis or in advance of holidays may have a different attitude as things look less panicky (if indeed that turns out to be the case; people can only stay "panicked" so long before "it sucks" becomes the new normal) and as the holiday season is actually upon us.
I doubt seriously explosive growth over launch quarter -- and I think the "news" about the "fall" in sales will definitely weigh on the shares. After one backs out the channel fill, though, do we think sales will be up, down, or the same? I for one can't really guess.
Take care,
--Tex.
re buying subscribers
To buy the subscribers? Apple has a ton of customers already, hitting the Apple Music Store -- um, the iTunes store -- all the time.
I say Apple would buy it (if at all; in fact I believe Apple will not) to get the contracts enabling it to offer all that content that Apple seems unable to get at adequately favorable terms. Apple's been stymied in getting content contracts to provide the movie business as impressive a catalog as the music business has. The inability to replace discs with downloads has been a killer for Apple's aTV, since the disc isn't something aTV is really helpful in supporting.
Buying a business that was made on physically mailing discs around, and throttling customers' consumption to prevent postage costs from eating all the profit, doesn't seem like an Apple play to me. NetFlix and Blockbuster are in battle trying to obsolete one another, and I don't think there's a lot of room to compete there and make a good go of it.
Take care,
--Tex.
OT Fuel prices
On Nov. 1 while driving to the Renaissance Festival, I saw gasoline selling for $1.899/gal, and Diesel selling as cheap as $2.999 (though not at the same shop; the price differential for the Diesel seems to be about $1 lately).
Take care,
--Tex.
re OS pricing
I was under the impression that Apple's price for its OS was an upgrade price. Since PyStar customers aren't assured to have an existing version to upgrade, what would their per-unit OEM fee be?
Like I said, I'm dying to know the terms of their deal.
Incidentally, case law from the most overturned federal circuit (the 9th) isn't where I'd start for argument on the sale/licensing issue. I do agree there's a bunch of BS involved, though, in the EULA and the terms a buyer should have enforced against him. The choice-of-law provisions in some of these agreements is a nuisance ... I think the whole mess is a consumer nightmare.
I think Apple's route -- to use Intel-compatible chipsets offered by the vendor with the best bang for the buck -- is OK so far. The question is whether Apple will screw the pooch eventually and end up in a proprietary backwater again. I think the new platform gives Apple a nimbleness in platform selection that should remain good -- enabling Apple to pick from time to time whether it's better off with any of a variety of different competitors. This probably means that folks could end up with support for lots of different hardware.
Apple's apparent route toward distinctiveness by using oddball hardware might not entrap Apple as it did with prior operating systems ... but this only invites questions about how Apple will get people who buy operating systems and not the hardware to pay the "new copy" price instead of the "upgrade" price.
Ideas?
Take care,
--Tex.
re PyStar
I'm frankly shocked these guys are still in business. I'm dying to hear the terms of the settlement.
Take care,
--Tex.
re "12"
I thought maybe it meant noon, and that as of this morning, I still had time
I don't have a lot of call for MS-Win apps, but it'd be nice to have the fall-back option. On the other hand, University pricing of MS-Office has been about $20 at the Univ. Texas, so it's not like I need to buy a $40 compatibility product to use a non-native version, when the native versions are ostensibly better in certain ways, and friendlier in dealing with other Mac apps.
Apple's current position is pretty good. I'm looking at call LEAPs to get more leverage out of my conviction Apple is underpriced. The trend toward smartphones, and Apple's apparent plan to move down the price ladder to choke off competition in smartphones, both seem to work in favor of Apple continuing to grow businesses related to phone hardware and software.
Oh, and Apple makes computers ....
Take care,
--Tex.
re crossover
Where does one get this code? I don't see a place to get the license code
Take care,
--Tex.
re Q
I don't know a thing about Q and pinks -- I just know collecting judgments in Texas. The guys running the bankruptcy proceeding are obviously trying to play chicken with the company's management in the American press. This is, from one point of view, hilarious: ETLT's management doesn't need to raise funds from the US, as it's drowning in cash; ETLT's management isn't looking to exit, as it expects to continue managing the company for some time and hasn't much concern about quarterly price fluctuations; ETLT's business is all in China, where US judgments aren't worth the paper they're printed on, and the US proceedings are of little consequence to ETLT's business partners in China.
ETLT will get the result of its appeal and either moot the bankruptcy proceeding, or realize it's got a genuine obligation and pay it. This dance in bankruptcy court during the pendency of the appeal is, as far as I can tell, a waste of resources for everyone involved -- unless they luck out and get Vanessa to sign a contempt order. She's signed stupid-as-he11 opinions before (e.g., on ERISA preemption) and I wouldn't necessarily bank on her to get anything right.
Take care,
--Tex.
August earnings releases aren't "news" though, and with CAAH trading so thinly you can't reliably exit a $10K position within a day (well, maybe at these recent prices you can), I don't see much help.
Note that with CAAH as a non-marginable stock, it's got a lot less value in a leveraged portfolio than some other speculative China plays one might make.
Now, looking for the long term: the profitability and growth are definitely good news, and will be helpful in creating share price growth when share prices rationalize. On the other hand, in the middle of a market liquidity crisis that's caused several price panics so far, I would not hold my breath for rational pricing in an illiquid penny stock whose operations all occur in another currency during a time of dollar deflation (all that evaporated capital makes US$ worth more each, apparently, and with US appetite for natural resources declining due to the recession, we're buying fewer foreign currency units with dollars -- and the US government may have created one of the few arenas of plausibly "safe" banking on the planet).
I like CAAH and I keep holding, and I expect eventual profits. However, I don't think we're looking at an exit in 2008 -- I think we're looking at riding out the recession and then waiting for people to get hungry for outside-the-US growth again.
Take care,
--Tex.
re non-GAAP
If Apple actually breaks this down to the point of offering non-GAAP metrics, then my concerns about the increasing opacity of Apple for valuation purposes may be misplaced.
http://jadedconsumer.blogspot.com/2008/08/rationally-pricing-shares-of-apple.html
The non-GAAP numbers will help show what Apple's quarterly results are without the impact of subscription accounting, which in the post-revenue-splitting era, I think are basically unsupported: Apple is getting paid up front and has no further enforceable obligation to perform once it has delivered the product.
The deferred revenue tsunami, as you call it, is an accounting figment that analysts will try to calculate away in the search for the "real" quarterly number, and it's good to see Apple stepping up with the answer to reduce confusion on the point.
The possibility that the impact of deferral is to double AAPL's eps is rather something; it means that sales of the iPhone (the source of the deferred revenue) have become extremely significant to AAPL in very little time. This is definitely a platform in which Apple will be investing time and effort to maintain competitiveness, as it seems to be the key to Apple's growth. Phone sales are much larger than computer sales, and Apple runs the software store. And Apple is selling entertainment content like games, music, and video. This is pretty darned big.
Take care,
--Tex.
OT Mini Cooper
I have a friend who died in a Mini Cooper after she bought it chiefly for its safety features; it had something like 11 airbags. The vehicle that struck hers left her plenty of room in the passenger compartment, but because none of the airbags deployed, her head struck the passenger window and the shock of the blow tore her brain near the stem. Experts examining the car say the car didn't malfunction: it was not designed to have its side curtain airbags deploy when slammed from the passenger side. One wonders what on Earth the air bags were for, if not to protect occupants from uncushioned impacts with the windows and body structures in the event of serious side impacts.
I'm not going to be particularly keen to wait on the results of an electric Mini marketing campaign.
Take care,
--Tex.
Amen.
abandoning the bottom end
By going to actual GPUs in all its notebooks, Apple has solved the "how do we deal with dropping component prices and keep making enough per-unit profit" problem by dumping competition among the lowest-end products.
This, of course, invites the question what Apple will be doing to lower its profit margins: moving its products upscale is ordinarily an upselling technique. Apple like everyone else will be moving its prices down for the same performance -- this is the tech market, right? -- and Apple's chosen to address the problem of the too-cheap lower-end product by dumping the low end in favor of more serious hardware acceleration and improved use of coprocessors across its lineup. Given Apple's next operating system's leverage of multiple processing units and graphics coprocessors in particular, the choice seems well-designed.
What it does for the near term isn't something I can see, of course, but it's obviously what Apple must do to keep selling differentiated, high-margin products.
Take care,
--Tex.
re retirement
I've had the sense in several presentations that Steve has been trying to get someone to carry the Apple torch plausibly in big presentations. Frankly, nobody has been up to doing what Steve has done. Nobody puts the sizzle in the whatever-they're-serving like Steve ... used to.
Apple has some great things ahead -- for example, the stuff Apple will be able to do with auto-parallelizing and by offloading tasks onto coprocessors (not just GPUs and integrated graphics hardware, but crypto-processing hardware on network cards and whatever else shows up for specialty work in the future) will really add value to the universe of Cocoa applications, making everybody's products more valuable and increasing the appeal of the platform.
Eventually, though, without someone to direct Apple toward leveraging of its sustainable advantages and to keep it from following unproductive rabbit trails, Apple will fall back in line with other companies and stop blowing the heck out of the marketplace. The question is whether that's an issue for fifteen years out, or three years out.
Take care,
--Tex.
re regime change
The problem is that when he does share the stage, it often merely serves to underscore that nobody else at Apple is Steve Jobs. It also, unfortunately, serves to inspire questions whether Jobs is no longer capable of putting on the presentation.
I expect Jobs to stay a bit longer than 2y, but it's clear Apple's lack of a succession plan is a real and continuing problem. Imagine Phil Schiller running Apple like Ballmer does MSFT: huge waste of an opportunity, and a significant loss of an investor opportunity.
Apple needs to develop a culture that produces Apple leaders, but it hasn't got it.
Take care,
--Tex.
re shootouts
There's this on feature comparison:
http://www.electronista.com/articles/08/10/16/macbook.comparison/
Take care,
--Tex.
re margins
The high recyclability of the aluminum is a plus, but I can't help but think that unless the extruder can take shavings as an input, there's a ton of energy wasted in reforming shavings into bulk metal for re-introduction into production. If Apple owns these facilities, Apple could be making a substantial investment in its own plant. This would drive up opex, unless right out of the gate the plant is more cost-effective than an already-depreciated plant run by folks bidding down assembly prices to keep their assembly lines busy.
The thing that strikes me on the per-unit side is that the Pro books have in essence two graphics engines, unless I misread it: an integrated graphics engine, for low-power use, and a full-blown graphics card with dedicated memory, for high-performance use. I don't think NVidia's chipset that includes integrated graphics is the low-cost offering.
Or does someone think NVidia is using Apple to try to break into the market, and paid for top billing in the new notebook lineup?
One good thing about aluminum is that it's soft. The machine tools will last a large number of cases.
Speaking of cases, the most recent Apple-is-an-evil-monopolist suit is terrible, just utterly pointless, and makes me think the attorneys must be getting paid by the hour. Who would take a pleaded-as-$75k federal antitrust case on contingency?
http://jadedconsumer.blogspot.com/2008/10/baffling-apple-monopoly-suit-filed.html
Take care,
--Tex.
re bag of hurt
I think he meant for BluRay authoring, which would of course be the first question in BluRay support: why can't we write these things, too? The licensing for playing is surely designed to encourage adoption, but there are so many standards involved in the creation of BluRay content -- it seems to be a container format with differently-encoded content like H.264 and WMA and AAC all mixed up next to each other inside -- that getting a license to author whatever you need to be able to claim you support BluRay authoring probably is a bag of hurt.
From what I read, the new displays are aimed at the laptops and don't replace the stuff offered for desktops -- nothing being shoved down users' throats like ADC. Also, the needed dongles are supposedly fairly slim, cheap deals unlike the adapters to ADC.
Still, I expect market malaise to carry on -- I'm not a short-term bull, just a medium term bull. Long-long term, I'm worried that there aren't a lot of folks not yet driven out of Apple who can drive the boat without being seduced by dumb ideas or otherwise getting lured off into the reeds. There's no culture at Apple to produce Apple-style leaders. There's Jobs, and everybody else. Whoops.
Take care,
--Tex.
re Best Buy
I understand Best Buy routinely offers products for sale above mfg suggested retail price. I thought Centrino was a generation of chips ago, and here they have it for $1k. On the other hand, I notice that the "Intel Brains" rating on the Centrino in there is "Genius" ....
In Best Buy's defense, that's a 17" LED and 4GB RAM, running a system sitting on a 320GB HD -- none of which appear on the $300 Dell.
And you get HP's bronze finish! OoooOOOOOoooOO!
The curiosity here for me is the offering of 64-bit MS-Win. I suppose MSFT's 32-bit compatibility is thought good enough to expect most things to work. If it really works, that's great for them -- they can actually use the 64-bit chips. It suggests that the Centrino in there really is a 64-bit chip, and not some old retread; maybe it lacks Core designation because of some chipset decisions that prevent branding the machine differently, and not because the CPU is showing age.
I can't really say much about how to compare these machines. That is one of the beauties of Apple's line-up: you can tell which machines fall where in the performance spectrum without having to consult an OEM whitepaper. The downside is that you don't get (if you want it) a subnotebook or mini-tower.
HP seems to have been able to gain on Dell, and maybe marketing cheap schlock as if it were slick cutting-edge stuff is part of the game. I honestly can't tell you which machine's processor is a better deal. The smaller LED has to save Dell a pretty penny, though -- that's a costly 17" part on the HP.
Take care,
--Tex.
re price differential
I suspect that the price differential is as always: Apple just doesn't make low-end hardware. The subnotebook is of course of great interest to some users, who consider a 9" screen a "feature" rather than a cost-savings measure. Apple was rumored to have a new subnotebook offering, but ... not yet.
That said, the fact that Dell has a $300 competitor is interesting in the extreme. I'm interested to know what comes preloaded on it. OpenOffice, for example, might make it seem a direct competitor to more machines in general use. On the other hand, "up to 1GB of RAM" sort of limits what one might expect to do with a computer:
http://arstechnica.com/news.ars/post/20080818-dells-eee-killer-to-ship-with-ubuntu-preinstalled.html
Folks who need something for word processing and don't mind hard drives limited to under 20GB are folks who might as easily keep using a notebook from eight years ago, like I do. Folks who think their old machine isn't keeping up might not be keen to move into the tiny Dell unless they are seriously into the tininess of it.
On the other hand, Viva la Linux! As MSFT's products become less necessary, we will see more and more meaningful competition where things count. At present, I still see web sites broken beyond usability by nitwit coders using MSFT tools to make IE-only sites. This kind of idiocy needs to stop, and the movement toward standards will only help. Consumers will benefit.
Speaking of my 8yo notebook ... the interior drive size is looking like I might actually be able to replace my G5 iMac with a notebook and not lose drive volume. If not now, certainly within a year. The new monitors are attractive to adopting the notebook-only lifestyle. I can't imagine using a SP machine with 16GB storage, but there are high-end notebooks that are definitely making me think now that the iMac could retire soon ....
Take care,
--Tex.
re shootouts
While I agree that the Apple is better understood now, I think that periodic price comparisons of feature-comparable models (post-Intel, you can discuss such a thing with a straight face without accusation of being subject to mind control) would be valuable to understand how Apple is positioning its products in price-competitiveness.
Apple has long been thought to be aiming at the high end of the computer market, and Apple receives something like a third of all notebook computer dollars while supplying a rather smaller fraction of notebook computers. Seeing what relative bang Apple delivers for a buck is worthwhile.
What the shootouts site never did was to show what folks were offering that Apple didn't compete with. In that sense, I think there's a problem of the dog that didn't bark in the night. Apple arguably does well in avoiding fights that either can't be won or aren't worth winning -- but we don't know everything about the market by looking at competitors' comparables to Apple's offerings.
Take care,
--Tex.
OT elder law
In what state?
Take care,
--Tex.
re Strange Partners
Normally, depending on Wal-Mart for distribution is the death-knell of margins. Perhaps Wal-Mart's game plan is to leverage existing contracts regarding service fee splitting to make money over time from phone sales, but I don't see this as increasing margins.
On the other hand, increased distribution tends to increase the size of the installed base, and thus the value of the platform. This could be pretty interesting.
Whether going with Wal-Mart is crazy, or crazy as a fox, remains to be seen.
Take care,
--Tex.
OT cash for equity
I haven't heard, and if you know I'd appreciate your sharing: is the government planning to buy the equity of companies in new issuance from the companies, or is the government planning on buying the equities from speculators and people raising cash to cover margin calls? Listening to the sound bites, I became concerned they might have meant the latter ...
TIA!
Incidentally, I think Buffett's interview wasn't meant to communicate that he had worked out how to buy the illiquid stuff at market, but that if a real market price were used it would yield good returns. Since there's not a lot of movement in these securities right now, I assume he's unwilling to guess what the price is and made instead deals that were easier to price. As a non-controlling investor (a 1% participation isn't normally getting one into the driver's seat), I assume that if invited to kick in $7B he'd be as good as his word if the rules could be spelled out. Since Congress is involved, I assume there is no guarantee the rules won't change with the political wind, and that no-one will be able to explain how the "market price" will be generated. So I don't expect a Buffett investment in these instruments, either alongside the Treasury (which probably won't invite him anyway) or alone (he won't be directing resources to price these things in an environment creating so much alternate opportunity).
Indeed, the more I think about it, the more I suspect the money will be squandered rather than invested by a Congress and by a succession of political appointees with little long-term political or economic or personal investment in the economic success of the purchase, whatever it is. Given the likelihood that Congress will try to turn the $700B into a giveaway for political purposes before the investments mature, maybe the only thing that poses any possibility of recovery is buying securities from financial firms that need liquidity. The steep price charged to Fannie Mae and Freddie Mac -- utter control of the firm plus a double-digit interest rate -- is in my opinion a more sound model for protecting the nation's investment than some of the crazy schemes I've heard suggested.
Take care,
--Tex.
OT re pretending that now near-worthless paper is a valuable asset that taxpayers should buy at higher-than-market prices
The guys I've talked to seem convinced that the implied default rate suggested by market pricing is greatly in excess of actual default rates, which means that if bought at market prices (and this was a point that Buffett repeated several times in an interview, linked here http://www.charlierose.com/shows/2008/10/01/1/an-exclusive-conversation-with-warren-buffett ), the mortgage instruments offer likely gain to someone solvent enough to tolerate their illiquidity while they mature.
Unless the government does something stupid (which is of course over a long period of time probably more likely than proponents of the plan would like to believe; Congress hasn't Buffett's patience), there is an expectation of positive return. Buffett put the return at a couple of trillion bucks on the $700B investment and said, in the interview linked above, that he wished he could invest alongside Treasury as a 1% partner.
Take care,
--Tex.
naked long buying
Yeah, in the interest of equality, we should be able to buy and just ... kind of ... never identify the currency we're delivering in consideration. We should be able to sort of never deliver it. There should be a Regulation CASH list of stocks for which there was a lot of failure to deliver the currency, and the SEC could ignore that list, too.
I can see how this market would get ... um ... some interesting write-ups in the press. Funny how failure to deliver on the other end of the transaction isn't a problem.
Take care,
--Tex.
OT modest proposal
OK, in this era of Check21 and other modern wonders of electronic transaction processing and actual movement between accounts on behalf of agents (banks for Check21, and presumably brokers for electronic securities transfers), what am I missing that can't be fixed?
I admit it -- I do not know the anatomy of current-era order processing enough to be able to identify the specific players whose behevior would change. However, is it so hard to have brokers require customers to identify the shares they will deliver? If not from their own account (close of a long position) then from an account in which they have authority to borrow shares (opening a long position, which may involve paying some transaction fees or rental fees to get the borrowing going and keep it running while the position is maintained). When there's not a failure to deliver, it seems to be adequately proven within t+3, unless I read things wrong.
I would like to know enough about the system to spot where it's broken, and to understand why some of the proposed fixes are unsound. If the answer isn't post-length, I'd appreciate links where I can see the things you're concerned about.
TIA!
Take care,
--Tex.
re equivalent rules
If the seller can't identify the shares he will deliver, he's not selling, he's running a scam. In a market not regulated by the federal government -- say, a flea market or an online market in books -- non-delivery is fraud. The fact that brokerages can hold shares in street name and avoid ever needing physical certificates because they are dealing with accounts held by the transfer agent means that identifying the shares doesn't require t+10 or anything like it, and neither does delivery.
My proposal is simple: documented identification of the shares to be delivered at the time of sale. If you can't identify what you plan delivering it, you can't seriously mean to deliver.
Think about the flip side, though. If delivery isn't serious, then why make it a nominal requirement? Why undermine market expectations with widely unenforced rules? And if you mean to keep free of the delivery requirement, how will one expect there to be any rationality in securities markets, when the scarcity of the product offered for sale is undermined by a fleet of never-have-to-deliver traders who can print all they like?
http://jadedconsumer.blogspot.com/2008/09/naked-shorts-alive-and-well.html
Take care,
--Tex.
all the 'protection' we need from short is genuine delivery
The problem would be somewhat self-limiting if actual delivery were enforced.
http://jadedconsumer.blogspot.com/2008/09/naked-shorts-alive-and-well.html
A simple, no-surprise requirement like this ... just too simple for regulators to accept?
Take care,
--Tex.
OT Regime Change
We've already had regime change at FRE and FNM, and we're threatening regime change wherever firms require a big enough asset buy-out, and unless I mistake the warrants arrangement with AIG we've already made clear AIG's new partner is the federal government, and with AIG execs spending $100k on posh hotels and spa treatments AFTER the $85b line of credit, then begging for tens of billions more, I expect more regime change.
The question is whether this regime change is for the better. In other words, with Goldman Sachs alumni at the helm of Treasury and some expertise in how to run a complex financial institution, perhaps there is some institutional understanding how to run as complex a beast as the New Treasury Department. But ... perhaps not? And with regime inevitable in the Treasury Department due to impending elections and a new executive, what are we going to get?
The CEO of an online auction house who thought buying Skype for billions was a slick idea? Some other celebrity?
The main problem with nationalization seems to be that government-run enterprises just don't have that hunger for efficiency and profit that one expects from private enterprise. I know a family that has owned (several times) a bank in Mexico that has been privatized and nationalized repeatedly as government squeezed all the good out of it and left it for dead, so it could be revitalized by someone who understood its business. It's the craziest story, but it's not uncommon in Central America for nationalization to work like that. Why would we have a different outcome in D.C.?
For my part, I think the regulators are indeed responsible for many of the features of the current market that are lending to lunacy. Atop the oversight-loosening at the SEC linked just recently, in which the SEC changed the rules, I think the SEC also made clear in recent years that it was happy to sit back while other rules were simply erased through nonenforcement.
http://jadedconsumer.blogspot.com/2008/09/naked-shorts-alive-and-well.html
It'll take some effort to clean house. The question is whether we have a good maid service on the task yet, or not. And whether the maids on the next shift can tell carpet cleaner from tile cleaner.
Take care,
--Tex.
The description of a case made from composite materials doesn't smell like single-block carving, but some bonding process intended to eliminate single-point fasteners like screws.
Carving a block of aluminum sounds much more costly than using one of the newer precision-molding processes. Stamping parts that can be bonded rather than joined with fasteners sounds even better on parts count and complexity.
The question is what features drive up costs so as to reduce margins. I'm certainly curious.
If it bombs, I'm also interested in seeing what kind of buy op materializes.
Take care,
--Tex.
OT bailout
I don't think that financial institutions should be given handouts for no demonstrable reason, either. My impression from the discussion so far of the plan is not to give handouts, but to liquidate illiquid assets that have some genuine long-term value -- assets that the market is currently pricing with a hefty illiquidity discount, but on which a reasonable return might be had by a patient buyer. Liquidity will help the whole financial landscape, and isn't a profit center for institutions if they are facing market prices from the government.
Likewise, I don't think solvent borrowers should get a "bonus" just because their loan was in a package taken over by a government buyer. If they are making and can keep making their payments, why "gift" them better terms than they bargained for? Why gift them terms if there's no reason to believe they were cheated? Rewriting mortgages may be one way to prevent foreclosures, but perhaps the solution isn't to give away the corpus of a bought loan, but to offer long-term solutions that protect both occupancy (preventing foreclosure) and taxpayer's expectation of a return. Gift write-downs would be toward the bottom of my list of solutions.
I haven't seen the terms and don't condemn the plan, but I hope that the idea of writing down mortgage balances and interest rates isn't the centerpiece of the $700B liquidity injection -- it would be a bailout, then.
Take care,
--Tex.
OT re debate
I thought the ORIGINAL idea -- the one Buffett said he wished he could participate in with his own $7 billion as a co-investor -- was to buy the illiquid mortgage assets at fire-sale prices to put something liquid on financial companies' balance sheets, something against which a loan can be made -- and then to hold until profitable exit way down the road.
Renegotiating loans that are still being paid is kinda nuts. Home buyers agreed to the terms.
If you want a package that's a bit more lenient, let's direct that at people who can demonstrate some genuine hardship -- starting with people actually facing foreclosure.
Millionaire speculators with shaky loans don't need a rate-reduction or principal reduction handout. The idea we'd reprice the loans on the basis of the current home values -- which is what he seemed strongly to indicate -- runs against the economic argument underpinning the $700 Billion as an affordable purchase. It's only affordable if an investment rather than a handout.
Squandering the asset post sale isn't the way to go.
===
On the flip side, Obama hasn't explained to my satisfaction how the new payroll tax in his health plan won't kill jobs and depress wages. On the tax front, I am suspicious that McCain's child deduction doubling will do more for middle income families. On the health front, the proposed tax credit is equally posh for all coverage buyers, but would help the poor more -- the credit would cover a much larger fraction of their taxes, and the rich facing taxation of currently-untaxed benefit plans would be paying at a higher marginal rate.
I don't see anyone showing the math on this, just slinging soundbites.
If it comes to a war of the sound-bites, Obama has a smoother voice and is better-looking, so it's a no-brainer he wins in November. I'd like to hear more policy detail, though.
Take care,
--Tex.
Making up those losses in volume!
I understand that trying to make growth happen in a behemoth company is hard without quality management, and that Microsoft has had to muddle through with delayed product releases and consumer products that have either cost it money (XBox; multiplying per-unit losses by a bigger unit volume isn't exactly the way forward to greater profit, it's a symptom of illness) or are just not significant enough to move the needle on an entity like MSFT (Zune may actually have a fan base, but with a couple of percent of the market -- stolen from MSFT's former revenue-sharing partners -- MSFT isn't going to make a big advance in its balance sheet). It's hard to make progress even when you know what progress should look like.
http://jadedconsumer.blogspot.com/2008/06/knowing-path-isnt-walking-path.html
Can you explain why increased XBox volume in the States is something shareholders should be happy, rather than sad, to hear? The whole XBox venture -- if you add up all the quarterly losses and compare to the recently-gamed quarterly profits -- has been a boondoggle, and each version will make life harder again. As hardware becomes cheaper and more portable, the platform will become increasingly obsolete, so it's hard to imagine there's a terrifically long timeline in which to recoup the losses. Re-engineering the XBox at the bleeding edge of the technically feasible would definitely put it ahead of encroaching portable competition and the like, but it would also re-start the clock on lots of fixed costs and keep MSFT's XBox margins in a sad state.
Microsoft makes lots of money on applications and operating systems. High-dollar server operating systems have been a good growth platform for Microsoft, and get the benefit of leveraging the desktop operating system for cost containment. The long-term trend has been that Microsoft actually gains share against free competitors in the server space:
http://news.netcraft.com/archives/2008/09/30/september_2008_web_server_survey.html
... on the other hand, of the several million new sites that went live in September, three-quarters were running Apache.
I don't think Dell has a sustainable competitive advantage.
http://jadedconsumer.blogspot.com/2008/08/dell-wheres-competitive-advantage.html
What's MSFT's advantage? Not the momentum or the customer base that might leave when it buys new machines, the sustainable advantage?
The next ten years may not be quite like the next ten years, but if they are, I don't think my money is on Microsoft.
http://jadedconsumer.blogspot.com/2008/10/next-ten-years.html
Take care,
--Tex.
re $30B?
Where do you get the $30B? I was looking at the last quarterly statement and came up with closer to $20B, or ~$24/sh.
http://jadedconsumer.blogspot.com/2008/10/does-apple-have-safety-net.html
It's a nice fantasy that Apple does something productive with the cash, but history isn't with that thesis. http://jadedconsumer.blogspot.com/2008/08/cashing-in-at-apple.html
Nevertheless, I like Apple near $90. On the other hand, I like ACAS far below NAV, so I'm having trouble working out the price at which I would actually pull the trigger on AAPL. Of course, ACAS' price is even crazier than AAPL's of late:
http://jadedconsumer.blogspot.com/2008/09/acas-sec-and-stock-buyback.html
In this market, looking for rationality may be a mistake. I don't think the prices in some of these stocks are under the control of reasonable people. Certain stocks give me a strong indication the basic system suffers from exploited flaws, which in the face of a panic is particularly problematic.
http://jadedconsumer.blogspot.com/2008/09/naked-shorts-alive-and-well.html
I don't think Apple is a naked-short target especially, though I think the combination of a liquidity crisis among leveraged stockholders and doubt about Apple's future returns have created a pretty good storm for the Apple shares. I expect the news to bear out the bull thesis, but I don't expect there to be a lot of capacity to buy in the face of the liquidity crisis. I'd be happy to be proven wrong.
In the meantime, ACAS is increasing its dividend and AGNC's first full quarter dividend turns out to be $1.00 a share, so life could be worse
http://jadedconsumer.blogspot.com/2008/09/making-money-old-fashioned-way-with.html
Now I'm off to do some billable work
Take care,
--Tex.
OT Getting Close.
Texas cops on riceburners.
What's the world come to?
Take care,
--Tex.