Archive for June, 2008
The Onion just wrote a fantastic satire piece on irresponsible population that just you have to read:
I thought financial stocks were cheap in February/March, but some have sold off quite a bit more since.
WaMu is down more than 88% in the last 12 months, which means that if you were to buy shares now for $4.80, and WaMu was to recover to its 52-week-high (around $43), you’d be rewarded with a ~900% return.
To accomplish this, WaMu would have to avoid bankruptcy, not get bought-out on the cheap by a competitor, cut costs, and improve the quality of its loan portfolio (easier said than done).
After this sobering realization, this hypothetical 900% gain seems extremely unlikely.
Living in Greece, I’ve discovered some things that could use improvement. One pet peeve of mine is that businesses rarely accept anything but cash. Why? Is Greece stuck in the stone-age?
The answer is a little bit more complicated.
To make a long story short, Greeks prefer cash to prevent tax authorities from seeing that revenue, effectively lowering their tax bill.
Here’s the long story:
Greece is a country rife with corruption, and tax evasion is a national sport. It’s estimated that between 28 and 35 percent of Greek GDP goes unreported (amounding to 70 billion euros). 25% of Greeks reportedly live on less than 22 euros a day, yet posh cafés are booked full despite selling the most expensive coffee in Europe (espresso shots often sell for 4 euros/$6.20).
Greek income clocks in at 80% of the Euro-zone average, hardly a good showing. But if the underground economy of unreported business was counted, Greek income per-capita would fall ahead of the Euro-zone average.
This pervasive tax evasion gives consumers more spending money, but it really hurts the public coffers. Tax revenues could conceivable double with more accurate reporting, leading to a reduction of public debt, increased spending on education, and more money for research and development.
Are these kids from Keratsini young alcoholics, or young recyclers?
Computer gaming kiddies armed with their parents’ American Express cards gobbled up Alienware’s aggressive designs over the last decade, turning the upstart into a formidable force in the computer industry — enough of a competitor that Dell scooped it up two years ago in a deal of undisclosed size.
That was a smart decision for Dell. Dell largely serves the corporate computer market, and its designs don’t appeal to any niches outside of corporate IT departments. Alienware, on the other hand, has captivated gamers with deep pockets, who don’t want the regular grey box setups that plague American homes and businesses.
Alienware has some problems, however. It’s known for manufacturing errors and shoddy customer service. A friend of mine, James (who is the IDEAL Alienware customer, I might add), has ordered two Alienware desktops, and has had problems both times. The second computer had the wrong part (perhaps it was a graphics card, or an incorrect memory configuration/size). When he called in to complain, Alienware told him he could pay his own way to send the machine in and pay for an upgrade, even though Alienware was responsible for messing up his machine’s configuration in the first place! His experience is not alone; a survey of computer forums shows widespread discontent with Alienware’s customer service.
Alienware also has an image problem. Real gamers won’t buy their machines. Gamers like to tout their technical abilities; this includes building their own computers from generic parts, often on the cheap. Alienware computers don’t give you the pride of building your own computer, and they also cost significantly more. It’s often been said that Dell’s XPS line of performance computers outperform Alienware, and at a much lower price. None of these revelations bode well for Alienware in the long term. Their ideal customer is rich, and new to gaming. Once initiated into the gaming community, one might be ostracized for ownng an Alienware and not having built their own for less.
Alienware does have pretty solid, differentiated designs. But their designs haven’t evolved enough to validate their additional cost.
They’re in the same market segment as Alienware, but they’re doing things differently: they’re doing everything right.
Their designs are evolving – not stagnating. Check out the design of their new desktop, the Omen:
It’s understated, modern, sharp, functional, and different. It positions the internal components 90 degrees off, allowing physics (heat rises, people!) to cool the internals and improve performance without resorting to loud internal fans.
Another innovative product they have is the Envy 133 notebook. It’s super-thin, and is the only notebook that really challenges Apple’s innovative design.
The trackpad is flush with the palmrest. Its power brick doubles as a WiFi hotspot. How many laptops can claim that?
With regard to customer relations, Voodoo also has it down. Their founder blogs to the gaming community, and Voodoo itself has a pretty legitimate blog that leaks photos and specs of their exciting new products. It’s one of the few corporate blogs that people actually read, because the blog isn’t just products, it also chronicles the steps the company takes to stay in touch with the gaming community. Voodoo sends teams armed with prizes and demos to gaming conventions, and they really keep consumers content (and happily engaged with new Voodoo products).
Voodoo’s management really has its head on straight, and stands as a beacon of hope for executive managers and entrepreneurs alike, no matter the industry.
We ran into this little animal inside the Starbucks in Varkiza:
I thought London was wealthy — here in Athens, it’s out of control! Last night, we went to a nightclub called Island with Patrick and Pavlos to celebrate the American College of Greece’s commencement, and the parking lot consisted of a Ferrari F430 Spyder, a Ferrari 599, a Porsche Turbo, an Audi R8, an Aston Martin DB V8, a BMW M6, various Range Rovers, Lotuses; the list goes on. I’ve never seen any parking lot quite like it (though I imagine car meetups in Dubai would blow this out of the water!)
Here are the comparatively humble shots of London’s supercars from our visit last week:
Only in Greece:
“Where’s the souvlaki stand? Let me grab my cigarettes…”
Translation: “Let’s get out of here.”
Try using that the next time you finish up at work and see if your less-Hellenic colleagues pick up on it.
Here are some ideas I’ve been thinking through lately (full disclosure: I have no position in any of the following firms unless specifically noted)
1. Buy Goldman Sachs?
WHY: All of the other investment banks had tons more exposure to debt writedowns than did Goldman, and those banks also managed the crisis poorly once it arrived. Investors are running away from investment banks that teeter near insolvency (Lehman Brothers, et cetera) due to the counterparty risk (if your broker goes bankrupt, your trades with them may be worthless). This means that investors might flock to safe, solvent brokerages, like Goldman Sachs. A price/earnings of less than 9 makes the bank look even more palatable.
2. Short Airlines?
WHY: Oil prices are sky-high. If the airlines raise fares, they’ll find themselves flying empty planes. Also, airlines are particularly f***ed when it comes to cost-cutting: they can’t easily scale-down the size of their fleets during downturns, and the high-fixed costs of operating a fleet equal a noose around their necks as costs rise. (Full disclosure: I’m short more than one airline).
3. Go long Brazil?
WHY: Brazil has the highest ethanol usage of any nation, allowing it to relieve the pain of skyrocketing oil prices. Their sugar ethanol capacity is unmatched, providing both an opportunity and a recession-reducer.
4. Go long China?
WHY: The iShares Xinhua China 25 Index is down more than 36% since its high last fall. In a global recession, China’s low labor costs might effectively pull it through unscathed. (Full disclosure: I’m holding a long position in several Chinese ETFs).
What assets do you think will outperform in the next year or two?
Sometimes, living in a place makes one oblivious to the beauty that surrounds them — I tried to forget about that and take some shots of a beautiful Seattle day this last week:
I’m a world away from Seattle, but reading this jewel of a news story from the Seattle P-I really made me perk up this evening:
Zango, formerly 180solutions, has received criticism over the years for installing its ad-serving software without computer users’ knowledge and making the uninstall process difficult to navigate. In 2006, the company settled a dispute with the Federal Trade Commission and agreed to pay a $3 million fine.
Since that time the company has made a series of acquisitions to broaden its focus, including New York-based HotBar…
I’ve hated this firm from day one, and pray for its demise in the coming months.
I’m not very bullish on Europe, as I’ve previously pointed out.
Today, I’ve come upon some more evidence that the US is the engine of global capitalism/innovation/research: according to the RAND Corporation (a non-profit thinktank), 40% of global research and development spending occurs in the United States. The US outspends the EU (which has a larger population than the US).
The number of science and technology graduates is slowly increasing, but inflation-adjusted S&T salaries haven’t increased much in 20 years, leading many American students to believe that S&T jobs don’t pay well. The study reasons that the US is at the forefront of R&D, but needs to pay grads higher salaries to gain more student cachet, and needs to pump up spending to maintain our dominance.
As some of you might have heard, Samuel Israel bilked investors for $400M in a ponzi-scheme posing as a hedge fund. He recently faked his own death only days before he was due to begin his 20-year jail sentence. He’s on the run and considered armed and dangerous.
His victims could’ve protected themselves if they’d only looked out for a few red flags:
His business card has an AOL email address.
Obviously, that’s only the tip of the iceberg.
When investing in hedge funds, you should demand professional quarterly audits to confirm the performance claimed by the manager, and you should call the auditor to confirm the numbers given to you by the fund are accurate. Also, have your lawyer scrutinize the offering document and add considerations to protect you against fraud.
Looks like reporting on the dog-eat-dog world of politics has taken its toll, RIP:
With Iran and Israel on the brink of war and the resurgence of an aggressive Russia, the world doesn’t look so stable anymore.
Considering that Russia supplies Iran with its nuclear materials, and that Russia often defends Iran in matters discussed at the UN, it’s not so hard to imagine Russia defending Iran militarily in a war against the United States and Israel. Russia was poised to enter the 1973 Yom Kippur war in support or Syria and Egypt, and was only kept out of it due to the threat of fully armed American B52s circling Greenland as a deterrent.
Looking on Wikipedia at some of the bombers that might be used, I came upon the Tupolev Tu-95, NATO codename Bear. It was introduced in 1952 — hardly a new plane — yet it’s projected to serve Russia in the long-range bomber role until 2040. The American B52 Stratofortress, which is just as outdated, will be retired from service at the same time.
Here is a surprising list of NATO encounters with the Tu-95, listing only events in this decade:
* April 2002 — two Tu-95s flew within 37 miles of Alaska, were intercepted by two F-15s.
* January 2004 — a Tu-95a flew over the USS Kitty Hawk in the Sea of Japan.
* 29 September 2006 — NORAD scrambled Canadian CF-18s from CFB Cold Lake in Central Alberta and American F-15s out of an airbase in Alaska to intercept a number of the Russian Tu-95 Bear heavy bombers participating in an annual Russian air force exercise near the coast of Alaska and Canada.
* May 2007 — the Royal Air Force scrambled two Tornado fighters from RAF Leuchars in Scotland to intercept a Tu-95 observing the Royal Navy exercise Neptune Warrior.
* 17 July 2007 — two Royal Norwegian Air Force F-16s (from Bodø, Norway) and subsequently two RAF Tornados (from RAF Leeming, England) intercepted two Tu-95s as they made their way down the Norwegian coast towards Scotland.
* August 2007 — two Tu-95s flew towards the U.S. base on Guam, were intercepted by U.S. fighter planes.
* 17 August 2007 — two RAF Typhoons were launched to intercept a Tu-95 that had veered towards British airspace over the North Sea. The Tu-95 later turned away.
* 5 September 2007 — six Russian bombers were intercepted by six F-15s from Elmendorf Air Force Base, 50 miles from the northwest coast of Alaska.
* 6 September 2007 — Two Norwegian F-16s tracked eight Tu-95s over the Barents Sea as they neared Norwegian airspace. The bombers flew past Norway and continued towards British airspace where four RAF Tornados were scrambled from RAF Leeming before the Russian planes turned away. It was the same day that Canadian Forces’ CF-18s were scrambled to escort Russian Tu-95s outside Canadian airspace near Inuvik, Northwest Territories.
* November 2007 — F-22A Raptors performed their first intercept of two Russian Tu-95s in Alaska.
* 9 February 2008 — 24 aircraft including F-15 Eagles and an E-767 AWAC from the Japanese air force scrambled and gave “a notice, then a warning and another a notice and a warning,” as a Russian Tu-95 violated the country’s airspace during a three-minute flyover of Sofugan in the Izu Islands. Japan formally issued a strong protest, demanded prevention of future incidents and presented a protest note to the Russian Embassy in Tokyo. Russian officials conversely stated that four Tupolev Tu-95 bombers completed a 10-hour mission over the Pacific on Saturday, but “our strategic aviation planes did not violate Japanese airspace.”
* 9 February 2008 — in the Western Pacific, a Russian Tu-95 flew over the aircraft carrier USS Nimitz twice, at a low altitude of about 2,000 feet, while another bomber circled about 58 miles out. Four American F/A-18 fighters were scrambled to track the bombers.
* 5 March 2008 — Off the eastern coast of South Korea, a Russian Tu-95 flew over USS Nimitz and was intercepted by two F/A-18 Hornets at an altitude of 2,000 feet at a distance of about 3-5 miles. Four South Korean F-16s were also scrambled to intercept the bomber.
* 26 March 2008 — Off the coast of Alaska, Two U.S. Air Force F-15s escorted two Russian Bear long-range bombers out of an air exclusion zone.
* 24 April 2008 — Two Tu-95 bombers from Engels-2, along with two Il-78 refueling aircraft, were escorted by NATO Tornados and F-16s over the Atlantic.
* 13 May 2008 — Two Tu-95 bombers from Ukrainka air base conducted a 20 hour patrol over the Arctic Ocean, CF-18s intercepted them as the bombers headed towards the Alaskan airspace.
Now, these are only the reported incidents with this particular Russian aircraft. Imagine all the other potential incidents involving fighters or naval assets! Also, notice how Russian incursions into others’ sovereign airspace (or close calls) have increased markedly since 2007. 2002, 2004, and 2006 saw only one incident each, while 2007 showed 7 incidents, and 2008 has already produced 6, and the year isn’t yet halfway over!
It seems somebody is trying to tout their air power.
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