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Taking A Look At Palm | 20 / 08 / 2008 | 0
Palm, the smartphone maker, might just be making a comeback. Over the last year or two, they’ve had a management shakeout, 25% of the company was bought by U2’s Bono and some ex-Apple execs, and the company’s aging product line was refreshed (on the low end by the Centro, and on the high end by the 800w and the Treo Pro a.k.a. Treo 850).
From a product competitiveness standpoint, Palm is in the best shape it’s been in since the launch of the Treo 700 and Treo 750 in 2006. Their new high-end Treos have all the specs needed (WiFi, GPS, HSDPA) to compete with RIM (BlackBerry) and the other Windows Mobile devices (Motorola Q9, Samsung Blackjack II). The problem is that in 2008, the smartphone market is more competitive than it was in 2005 and 2006 — the last period of time that Palm performed well. Palm products now have the iPhone to compete with, as well as a line of BlackBerries that has more depth (different models to serve more niche audiences) and more enterprise adoption (many firms have been running BlackBerry Enterprise Server for years and are unlikely to switch). Clearly, Palm’s new products are not a ‘perfect storm’ scenario. In fact, if anything, it’s a truly sad situation: Palm finally came out of the gate with some really strong products, and their competition has already decided their fate by having cooler products (Apple) and a competitive moat (RIM). Let’s look at Palm stock for a moment. Palm (NASDAQ: PALM) is down 49% in the last 12 months. By comparison, its northern competitor, RIM (NASDAQ: RIMM) is up more than 65%. Palm stock has followed a pattern since November 2007 of occasionally rallying to $7, and then falling down closer to $5. As recently as a month ago, shares could be had for $5.33. Since then, we’ve seen a stronger-than-usual rally, with the stock surpassing $7. Shares today are selling for $7.76 (a gain of more than 40% in only 4 weeks!). Now, if you look at previous rallies from earlier this spring and summer, you’ll see that this one could very well subside just as the previous ones did. Palm’s income statement and cash flow numbers don’t look very promising, which lends to the idea that share purchases will be contained, and share sales would perhaps outpace purchases. But if you believe, as I do, that Palm’s new products will propel them to higher sales numbers during the 3rd and 4th quarters, perhaps buying Palm shares makes sense. I’m still trying to figure out where I stand on Palm. I guess it doesn’t matter if Palm makes a sensational comeback or not. They’ve at least proven that they can take on powerhouse RIM, which may be consolation enough. Edit: Wired GadgetLab and a telecom analyst at Global Crown Capital seem to agree. 
Published under: Business, Cellphones, Finance, Technology
AltaRock | 19 / 08 / 2008 | 0
This is sick. You never thought crack rocks could be so profitable, or so positive for society (technically, using water to crack really hot rocks, underground). Google, Paul Allen, others sink $26 million in geothermal startup
Published under: Business, Finance, Seattle
Whole Foods | 12 / 08 / 2008 | 1
Whole Foods (NASDAQ: WFMI) has been having a tough year. Consumers have been hit by the economic downturn and high gas prices, and are scaling back their spending on top-shelf goods, such as those at Whole Foods. In addition to the broader consumer ills, Whole Foods bought out its chief competitor (acquisitions rarely turn out well, in case you didn’t know), Wild Oats, and integrating their new purchase has been costly and full of unforeseen speedbumps. Then, Whole Foods got hit by the E. coli bug recently, when they found out that one of their beef suppliers had switched up its processing plant without giving notice, which ended in Whole Foods’ beef being contaminated with E. coli, and a costly and embarrassing recall. What does all of this bad news mean? Potentially, it means a buying opportunity: Whole Foods stock is down fully 75% from its peak in early 2006. The Motley Fool, a stock research service for retail investors that I happen to subscribe to, has noticed the stock’s precipitous fall as well, and is advising its subscribers to think about buying shares now. Is Whole Foods a bargain?
Published under: Business, Economics, Finance
Apple’s Cleanup Hitters On Deck | 30 / 07 / 2008 | 0
As I’ve said before, Apple is soon poised to unleash its redesigned MacBook/MacBook Pros on us, and the unveiling may provide a significant lift to Apple’s revenues (not to mention their share price). AppleInsider reports that Apple “issued an advisement bulletin to some of its channel partners hinting at a manufacturing ramp down of iPods and certain Mac notebook models, which will result in limited supplies of those products in the coming weeks.” This is standard practice indicating that a new product launch is coming. I believe it will be on us by October 1st at the latest. What he have to look forward to: -redesigned/updated iPod Touch Apple stock isn’t cheap, but it’s trading at a 15% discount to its price in early June. With these impending product introductions and the ensuing monster sales revenue, I wouldn’t be surprised if Apple was able to top $200 by Christmas time. Mark my words.
Published under: Business, Finance, Technology
Apple Falls | 22 / 07 / 2008 | 1
Apple stock has fallen 14.5% in the last two weeks, to $153/share (it sold for as little as $147 this morning). Apple has just reported third-quarter earnings, and though they beat expectations, their tempered outlook for the future gave analysts cold feet and sent shares lower. Steve Jobs’ health problems surely didn’t make analysts any happier. Mac sales, however, are through the roof. This is particularly cheery news considering Mac computers haven’t had any significant redesign (less the MacBook Air) in ages. If people are going nuts buying the old, outdated Macs, they’ll surely buy more of them (or pay a bigger premium for them) once the redesigned MacBook Pros/MacBooks are available (sometime in the next 12 months). Count me as one of those who is waiting for the redesign(s) to buy a new Mac. This quarter’s iPhone sales clocked in at only 717,000, due to the shortage of first-generation iPhones prior to the iPhone 3G’s launch (remember, 1 million iPhone 3G’s were sold in the opening weekend alone). Next quarter’s report will be much more telling as to the iPhone 3G’s sales numbers, which will be stellar (somewhere in the realm of 2 or 3 million units). Apple stock is no bargain even after its recent fall, but those growth investors looking for a well-branded firm with solid growth prospects and a reliable track record of innovative design (not to mention intense consumer loyalty) need look no further. Apple isn’t leaving the stage anytime soon.
Published under: Business, Finance, Technology
Stocks in Pakistan | 17 / 07 / 2008 | 1
At the Karachi Stock Exchange: In Karachi investors today broke windows, threw plant holders in the parking lot of the building, burned shareholder statements and at least one protester was injured, prompting intervention by police and the paramilitary. Right. Hopefully, the Small Investors Association will learn their lesson. Stocks are the best tool for building wealth, but at times they can be volatile. The wealth you build in stocks may only be apparent in the long term, when the upside and downside volatility is averaged out. Pakistani Investors Stone Karachi Exchange as Stocks Plunge
Published under: Economics, Emerging Markets, Finance
WaMu: Vultures Are Circling | 15 / 07 / 2008 | 1
Outside of Washington Mutual headquarters this morning, things didn’t look so rosy. The local CBS affiliate sent a news crew to report on WaMu’s potential insolvency and the big hit the stock took yesterday. If the media keeps blowing on the flames by reporting on potential bank failures, they might just come up with a self-fulfilling prophecy.
Published under: Business, Finance, Seattle
WaMu Rumors | 14 / 07 / 2008 | 2
Shares of Washington Mutual slid 35% during the trading session today, on fears of the bank failing after IndyMac Bank was taken over by the FDIC over the weekend. The bank’s position is solid, with over $40 billion in liquidity and $150 billion in retail deposits, according to a Business Wire brief sent out at the end of trading. Unfortunately, people aren’t very trusting of bank CEOs right now, what with Bear Stearns’ outright denial that it was troubled up until the day it was bought for pennies on the dollar by JPMorgan. My mother rang me just now and told me that she’d just returned from Washington Mutual, where she’d withdrawn all of her money after hearing from her boss’ lawyer that WaMu was going down. Now, there is no reason to foolishly panic. The only people who need to do anything with their bank accounts are those who have more than $100,000 deposited at any single bank. Those people ought to withdraw money and put it into similar accounts at other banks, so as to ensure that all their deposits are FDIC-protected. Washington Mutual may not be the best-managed bank in the world, but it’s an important employer in my state, and I’d like it to stay solvent. Tell your friends the truth, and correct them when they spread inaccurate rumors. Inaccurate rumors kill banks, and in the end, it may be someone dear to you — a bank employee — who gets fired because of it. What if my bank fails? - BusinessWeek
Published under: Business, Finance, No F***ing Way, Seattle
Spain Takes Over | 14 / 07 / 2008 | 0
Spaniard Rafael Nadal is just coming off historic wins at Wimbledon and Roland Garros. The Spanish national soccer team won the European Championship at the end of June, decisively defeating stalwart Russia and then hosing host-country Germany in the final. Spain is the current world basketball champion, having defeated Greece in 2006, and the world’s undisputed best chef, Ferran Adrià, calls Spain home. Spain’s economy is steamrolling the rest of Europe’s, having passed Italy in per-capita GDP in 2006, and is on course to overtake France and Germany in that measure in the next 5 years. The Spanish are bouyed by tourism, a housing boom, population growth from immigration, a strong fashion/retail sector, and banking. In fact, I used to work for Spanish banking giant BBVA, which has a massive footprint in fast-growing Latin America. BBVA bought a large bank in the southern U.S., Compass Bancshares, just last year. BBVA’s chief rival is Santander, a group that has also made significant inroads in Latin America, but has bought into U.K. banks instead of the American ones. Santander bought British banking giant Abbey National for £9.5 billion in 2004, and today, they’ve announced that they’re buying British retail bank Alliance & Leicester for £2.6 billion;a 50% discount from A&L’s market value in February of this year. Talk about a steal. This acquisition will give Santander another 8% of the banking market in the U.K., and allow for a combination of Abbey and Alliance & Leicester to realize real cost savings, making this acquisition even more worthwhile for Santander.
Published under: Business, Economics, Europe, Finance
WaMu’s Precipitous Fall | 27 / 06 / 2008 | 0
I thought financial stocks were cheap in February/March, but some have sold off quite a bit more since. Patrick Kavanagh just told me to check Washington Mutual’s share price out, and OUCH, has it been hurt! 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.
Published under: Business, Finance, No F***ing Way, Seattle
Time To Buy Goldman Sachs? | 17 / 06 / 2008 | 2
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? 2. Short Airlines? 3. Go long Brazil? 4. Go long China? What assets do you think will outperform in the next year or two?
Published under: Business, Economics, Emerging Markets, Finance
Hedge Fund Legitimacy | 13 / 06 / 2008 | 0
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.
Published under: Finance, No F***ing Way, Philosophy
Israel and Iran Battle It Out | 10 / 06 / 2008 | 0
Thomas Friedman writes something worthwhile!: People vs. Dinosaurs - The New York Times …in the first quarter of 2008, the top four economies after America in attracting venture capital for start-ups were: Europe $1.53 billion, China $719 million, Israel $572 million and India $99 million [...]. Israel, with 7 million people, attracted almost as much as China, with 1.3 billion. Iranian President Mahmoud Ahmadinejad professes not to care about such things — because oil prices have gone up to nearly $140 a barrel, he feels relaxed predicting that Israel will disappear, while Iran maintains a welfare state — with more than 10 percent unemployment. Iran has invented nothing of importance since the Islamic Revolution, which is a shame. Historically, Iranians have been a dynamic and inventive people — one only need look at the richness of Persian civilization to see that. But the Islamic regime there today does not trust its people and will not empower them as individuals. Iran’s economic and military clout today is largely dependent on extracting oil from the ground. Israel’s economic and military power today is entirely dependent on extracting intelligence from its people. Israel’s economic power is endlessly renewable. Iran’s is a dwindling resource based on fossil fuels made from dead dinosaurs. So who will be here in 20 years? [...] I’ll bet on the people who bet on their people — not the people who bet on dead dinosaurs. (Thanks for linking to this article first, Barak).
Published under: Business, Economics, Emerging Markets, Finance, Philosophy, Politics
Apple Stock Tanks | 9 / 06 / 2008 | 1
The herd that is the market has spoken: Apple is not invincible on launch day. Apple launched the iPhone 2.0 as well as some innovative software and services, only to see its stock slump by over 4%, to $176. To some, this was the expected result: 5/12/08 15:27, Cameron Newland wrote: Others seemed to think that Apple’s stock, invincible as ever, would be the “next big thing”, breaking $250/share after the announcement (as I write this, Apple stock is hovering around $180/share): 5/12/08 17:19, Clark Kent wrote: I think you greedy sh*ts should all sell your AAPL today and get back YOU ARE THE PROBLEM WHY AAPL always go up and down. You are the herd Go hide under some rock, you do not deserve to be AAPL holders. Steve and Apple are great companies and they are too many times the I’ll be laughing my way to the Bank when AAPL goes upwards of $250 AH AH AH AH, indeed. Later, this same user, “Clark Kent”, reasons that because television personality Jim Cramer suggests not to sell Apple on announcement day, that we should blindly follow his advice. That notion runs counter to the very effective strategy of doing THE EXACT OPPOSITE of what Jim Cramer recommends. Remember that Jim Cramer famously advised his viewers to hold on to laggard Bear Stearns at $63/share earlier this year, less than a week before the struggling bank was bought by JPMorgan for $2/share. Why, then, should we heed his advice? Both Jim Cramer and this “Clark Kent” character are emotionally attached to their favored stocks. Their mistake ensures they’ll never stop to consider what everyone else (the market) thinks, and in the end their ignorance will only make them poorer. Some people never learn…
Published under: Finance, Technology
Suicidal Centi-Millionaire | 2 / 06 / 2008 | 0
Jim Clark was a quiet, geeky engineer with poor social skills. He invented the Geometry Engine, which brought computer graphics a giant step forward and was the basis for the success of his company, Silicon Graphics. Glenn Mueller was a venture capital investor; the man who funded Jim Clark’s dream company and consequently milked Clark of his ownership stake, to the point that founder Clark controlled only 5% of his own company and his reigns were taken away. Clark plotted his revenge from inside Silicon Graphics. He pioneered the next big idea, interactive TV, along with Time Warner Cable. When the Silicon Graphics CEO took all the credit, it was the final straw, and Clark left Silicon Graphics. His new idea: to defeat Silicon Graphics’ interactive TV with the internet-connected computer. He then founded Netscape to do just that. Silicon Valley venture capitalists wanted a piece of the company. Jim Clark let a select few invest in Netscape, but not Glenn Mueller, who had milked Clark of his ever-so-precious ownership once before and became a centi-millionaire in the process. Mueller called again and again, but Clark just wouldn’t budge. Mueller wasn’t going to get a single share of Netscape. He’d missed the boat on the next big thing, and he knew it. The day Netscape was incorporated, Mueller was on his yacht off Cabo San Lucas. He picked up a gun and shot himself through the head. The Little Creepy Crawlers Who Will Eat You In The Night - Michael Lewis for the New York Times
Published under: Business, Finance, No F***ing Way, Technology
Heath Ledger’s Genius Girl | 1 / 06 / 2008 | 1
The late Heath Ledger’s fianceé, Michelle Williams, is much more than an accomplished actress. After emancipating herself from her parents at the age of 15, she showed promise in her father’s occupation: stock and futures trading. In 1997 at the age of 16, she won the Robbins World Cup Trading Championship, as her father had done ten years earlier. She turned $10,000 into $110,000 over the course of a year, the fourth highest return in the history of the competition (her father Larry’s being the highest at ~$1,100,000). She then continued her acting career, landing roles in TV’s Dawson’s Creek and, notably, Brokeback Mountain. Her father Larry is currently in Australia, fighting his extradition to America on charges of tax evasion. He maintains his innocence.
Published under: Finance, No F***ing Way
Debtor Nation | 18 / 05 / 2008 | 1
The United States is a nation of a debtors, and a debtor nation, sporting large budget and trade deficits. We’ve yet to default on our debts. Don’t ever lend money to Russia, though. Russia famously defaulted on their foreign debt obligations in 1998, sending the world economy into a tailspin. They’ve avoided payment on other obligations as well. During the Russo-Japanese war of 1904-1905, the French underwrote much of the Russian war effort with bonds. These bonds became worthless in the Bolshevik Revolution of 1917. French bondholders made noise about the issue for years, but to no avail. Finally, when a post-Communist Russia re-emerged in the 1990’s and wanted access to global debt markets, Russia needed to convince Europe (and the world) that they could be trusted to pay their debts. Russia paid off its debt to France with a one-time $400 million gift in 1996 — equal to roughly 1.5% of what the bonds would have been worth with 79 years of interest. Don’t get caught in the same deal. Russia to repay pre-1917 debt - Bloomberg News/NYT
Published under: Economics, Emerging Markets, Europe, Finance, No F***ing Way
Hezbollah Debt Upgraded by Moody’s, S&P | 9 / 05 / 2008 | 1
NEW YORK, May 9 (Reuters) - The takeover of the Muslim half of Beirut by the Iranian-backed Lebanese group Hezbollah on Friday reflects increased Hezbollah dominance in the country and has resulted in Hezbollah’s long term debt being upgraded, Moody’s Investors Service said. The credit ratings agency said on Friday that Hezbollahs “Baa1″ rating, an upgrade from “Ba2″ (speculative, non-investment grade) was due to a an increased tax base in West Beirut and a stable outlook. “Given that the hostile neighborhood takeover has added roughly 200,000 to the number of people under Hezbollah control, Moody’s believes that the increased tax receipts combined with reluctance on the part of Lebanese Government fighters to put up a real fight encapsulate the risk of continuing severe political turmoil,” Tristan Cooper, sovereign ratings analyst at Moody’s said in a statement. Hezbollah has never defaulted on its debt, despite experiencing many destabilizing political shocks, including a 15-year civil war between 1975 and 1990 and a devastating month-long war with Israel in 2006, the statement said. The agency said it recognizes Lebanon’s poor state of public finances, however the central bank still has a large stock of foreign currency reserves, $10.8 billion in February, or about 45 percent of gross domestic product, which could legitimately be seized by Hezbollah and used to bolster security and buy more advanced weaponry from Iran. While legally constrained from being sold, central bank gold reserves worth $8.9 billion in February also acts as a source of wealth that Hezbollah could tap in case of turmoil. In addition, the world’s penchant for forceful intervention has over the years become increasingly weak, as incursions in Iraq and Afghanistan have turned into overly long ordeals requiring increasing amounts of resources coupled with strong insurgencies. “Lebanon just doesn’t have enough natural resources, like oil — they don’t even have the geography for a potential pipeline that we usually like to see before we liberate a country,” said former UN ambassador John Bolton. Moody’s said that while these factors have made the international community resistant to physical intervention, it remains concerned about current developments and is monitoring the situation. Lebanon’s “B3″ credit rating reflects turmoil-Moody’s
Published under: Economics, Emerging Markets, Finance, Politics
Zimbabwe Issues $250 MM Bill | 7 / 05 / 2008 | 2
In April, Zimbabwe launched the $50 million bill, as inflation levels there push 165,000% per year and quickly make last week’s paycheck worthless. A loaf of bread now costs around $80 million; a bunch of five bananas costs close to $100 million. Now, they’ve gone ahead and launched the $100 million an $250 million bills. Imagine living in a country where cash has an expiration date! Zimbabwean bills are all “bearer’s cheques”, which have expiration dates — some as little as one or two months from their printing. Zimbabwe issues 250 mn dollar banknote to tackle price spiral
Published under: Economics, Emerging Markets, Finance, No F***ing Way
Maveron Hits Turbulence | 28 / 04 / 2008 | 2
News just hit that Eos Airlines (the upstart airline that offered 1st class/business class only flights between New York and London) has filed for chapter 11 bankruptcy. This is bad news for Seattle-based Maveron, the venture capital firm backed by Starbucks Chairman and CEO Howard Schultz. Maveron was one of three firms involved in funding Eos with $123 million For reference, Maveron’s other investments include PinkBerry (a high-flying, quickly expanding, and soon to be out-of-fashion purveyor of delicious-but-overpriced custom-built frozen yoghurt), lucy activewear (a women’s activewear firm, the only real competitor to lululemon athletica), and eBay. That Maveron has invested in these firms shows that their principals really know how to spot hot young brands that innovate/differentiate themselves into premium niches. What it doesn’t show is whether they’ll make money doing it. Perhaps I should wait to pass judgment on Maveron - after all, they are a VC firm, and VC’s are known to strike out half the time, hoping for a big payoff in that one grand-slam they hit every once in a while that will bring their fund into the black. And Maveron has hit plenty of grand slams: eBay, Shutterfly, Quellos, PeoplePC, Drugstore.com, Cranium (boardgame). It’s just so easy for me to criticize these guys because I know their strategy so well. In fact, one of the strategies utilized in my ScarletStorm fund is finding growth candidates that have quickly established a premium brand by differentiating themselves and/or displaying real improvements over competitors’ offerings. At first glance, both Eos and PinkBerry fit the mold. The difference between my growth investments and Maveron’s is that I’m a strict value investor: I’ll only bite if the firm’s intrinsic value (as I calculate it) is higher than the price I can acquire a piece for. That restriction would have prevented me from throwing money at Eos, as they’re not even profitable (hence I’d value the firm at $0). Obviously, that means I would’ve never invested in Amazon.com, which went public years before it became profitable. Perhaps to hit home runs, you’ve got to take swings at pitches that don’t appear to be strikes. I commend Maveron for doing something right. Perhaps someone over there could sprout some value-seeking sense and hit some solid doubles.
Published under: Business, Finance, Seattle
The Magic of Compounding Interest | 27 / 04 / 2008 | 0
Albert Einstein is quoted as saying that compounding interest is “the most powerful force in the universe.” L.A. entertainment billionaire David Geffen has just been the victim of compounding interest, according to the L.A. Times: “Media mogul David Geffen [...] recently spent about $10 million on a 1,473-square-foot two-bedroom house [in Malibu]. [...] What makes the transaction interesting is that Geffen owned this same property once before. He bought it in 1996 for approximately $1.2 million and sold it two years later…” David Geffen bought it in 1996 for $1.2 million, sold it, and bought it back 12 years later for $9.8 million (which amounts to a more than 800% markup over the original purchase price). Seems like Geffen got taken, no? Well, the magic of compound interest suggests otherwise. See, that 800% gain over 12 years amounts to only a 19% annual property appreciation rate, and shrewd businessmen like Mr. Geffen can often increase their net worth at rates above that level. They have investment options such as private equity funds (which generally aren’t available to those worth less than 8 figures) which historically generate returns above 25%. Warren Buffet, the famed stock investor, has averaged gains above 25% over the last 30 years. If we assume Mr. Geffen was using appropriate instruments to increase his wealth at these rates, then perhaps his $1.2 million sale and $9.8 million repurchase make sense: $1,200,000 * 1.2510 = $11,175,870 Mr. Geffen’s gains from investments at an assumed 25%/year on $1.2 million dollars from 1998 to 2008 would turn his principal into $11,175,870 pre-tax. Buying the home back in 2008 for $9.8 million means that he would pocket an additional $1,375,870 (his investment gains minus the 2008 purchase price), would have avoided paying waterfront property taxes for 12 years, and still own the home. The only thing that he would’ve missed out on is use of the home for those 12 years, which wouldn’t hurt Mr. Geffen at all because he already owns a multi-lot palace nearby. This calculation is extremely conservative - Geffen probably pocketed much more than this projected $1.375 million because he probably sold the home in 1998 for more than the $1.2 million that he paid.
Perhaps Mr. Geffen didn’t let compound interest beat him, and instead, he taught the power of interest a lesson.
Published under: Business, City of Angels, Finance
Philippine Finance | 17 / 04 / 2008 | 0
Dealbreaker posted a pretty funny excerpt from (of all things) a bond prospectus issued by the Republic of the Philippines. The country’s bond prospectus includes a list of risks, and the following were found under “Recent Political Developments”: Election Protest of Legarda So what, maybe they’ve got a few “risks”? It reminded me of this exchange between a panelist and an editor during a 1986 stock-picking roundtable for Barron’s, as documented by Peter Lynch: Ed Goodnow (a panelist touting Philippine Long Distance Telephone Co.): I understand the service is not so good out in the provinces. One of the problems is that it’s hard to get the guys to go up the poles to fix the lines because they sometimes get picked off by snipers. But other than that, they’ve got a very solid operation.
Published under: Emerging Markets, Finance, No F***ing Way, Quotes
Classmates Dot Com | 7 / 04 / 2008 | 0
Have any of your former schoolmates made it big? My friend James Grabowski always wondered aloud at who in our graduating class would break through first. We both put our money on Josh Caldwell, who has since won an MTV movie award for his work as an independent filmmaker. Little did we know that Bellevue High School alum Nick Kamerling would garner even more press for being involved in a pump-and-dump stock scam: A Seattle grand jury on Wednesday indicted a Bellevue woman and her son, along with six others, on 21 federal counts, accusing them of participating in a securities-fraud scheme. Beverlee Kamerling, 63, and her son, Nicholas Alexander, 22, allegedly got control of four small companies, caused shares of those companies to be issued unlawfully and promoted the sale of those shares through hyperbolic news releases and unsolicited faxes. The U.S. attorney’s office in Seattle also alleged that the defendants committed four counts of mail fraud, one count of international money laundering, and several counts of conspiracy to obstruct justice, perjury and obstruction of justice. The indictment also alleges that Kamerling failed to pay taxes on nearly $850,000 in 2004 and 2005. Some of that money was derived from the securities scheme. Bellevue attorney Tolan Furusho, the Kamerlings’ business partner, has pleaded guilty to conspiracy and tax-evasion charges and is cooperating in the investigation. Nick is being explicitly targeted for shredding documents in order to frustrate the investigation, and switching to untraceable prepaid cellphones in order to evade FBI wiretaps. It’s too bad that Nick’s shadowy family got him involved in their shady dealings. They should’ve learned their lesson from their many previous incidents with law enforcement. For the Kamerlings, this marks only the most recent in a strings of legal troubles and improprieties. Beverly was given a 10 year ban from dealing in Canadian securities in 1989 amid charges of fraud, and once safely south of the border, she soon found herself touting art in what has become a continent-wide scam. Beverly and conspirators used shadowy art galleries and rotten accounting to pump up prices of art pieces by relative unknown “Sky Jones”, which they sold to unsuspecting amateur collectors. A 2003 SEC complaint alleged that one co-conspirator overstated the value of forty-one paintings by “Sky Jones,” which they claimed had a value of $1.7 million. The SEC said it proved at trial that the paintings were worth no more than $10,350. Sky Jones, whose real name is Michael Richard Whipple, cranked out more than 8,000 pieces of “artwork,” mostly while holed up in a trailer outside Fort Worth, Tex., without electricity, running water or even a telephone. He invented fictional appraisers to value his own paintings at astronomical values. While Sky Jones was not a household name in Sotheby’s circles, the painter surmounted this problem by using numerous alto egos, especially Joseph B. Banker, a fictional character who, as founder of the Bankers Art Museum, was a big fan. Bankers Art Museum currently lists Beverly Kamerling as an “offender”, a.k.a. an art thief who has outstanding “unreturned consignments” by the artist. After the art scheme, Ms. Kamerling went back to illegal stock touting. She secretly gained control of United Fire Technology sometime between 1994 and 1997, then made overzealous, misleading, and false statements about the company while illegally selling stock. Kamerling was ordered to disgorge her ill-gotten gains of $1.06 million, pay an additional $412,000, and be permanently prohibited from serving as an officer or director of any publicly traded corporation. On June 9, 2000, Kamerling’s assets were ordered frozen after she failed to pay the $1.5M disgorgement. Despite the fact that she had funds to pay at least part of the judgment, during the three months following the judgment Kamerling used nearly $400,000 for personal expenses, including the purchase of $68,000 of items from an October 1999 auction of Marilyn Monroe’s personal property. Kamerling displayed some of the Marilyn Monroe items she purchased on an Oprah Winfrey broadcast on November 8, 1999. Her shady lawyer Mr. Furusho said that Ms. Kamerling was bidding on behalf of others, with their money. Right. In 2004, she was involved in fraud involving Alberta Goldtech Mining Corp. She was fined $75,000 and was permanently banned from Alberta capital markets. Tolan Furusho, her lawyer, was fined the same amount. Since then, they’ve been busy. Their current legal trouble counts fraudulent activities involving America Asia Energy, Coattec Industries Inc., Detex Security Systems Inc. and Global Gaming Network Inc. All are based in Washington except Detex, which is based in Tel Aviv, Israel. My question is, how do these kinds of criminals continue to evade meaningful punishment? They keep at it, failing to learn their lesson, and they’re always able to move on to more gullible targets elsewhere. What’s the solution to this kind of rampant fraud? Permanent imprisonment? I hope the next notable Bellevue High alum attains notoriety for something considerably more legal and honorable. Bellevue woman and son indicted in stock fraud scheme - Seattle P-I
Published under: Finance, No F***ing Way, Seattle
Corrupting The Private Sector | 6 / 04 / 2008 | 0
When government oversteps its bounds and imposes undue regulation upon private business, it’s rare that anything good comes of it. Ill-advised government mandates on lenders to lend money to poor people are partly to blame for the subprime mortgage meltdown, according to economics professor Stan Liebowitz:
NYP via Donald L. Luskin
Published under: Business, Finance, No F***ing Way, Politics
Banks are Confusing | 28 / 02 / 2008 | 0
A relative of mine, Abraham Newland, was the chief cashier of the Bank of England from 1782 until his death in 1807. Britons at the time called banknotes “Abraham Newlands” because all banknotes bore his signature. He was a pretty confusing guy. He owned a grand country estate, yet chose to sleep at the office every night for 25 years. Bankers can be quirky, but banks take the cake: What is now Bank of America was originally called Bank of Italy when it was founded, in 1904, not in Italy but rather San Francisco, California. It’s now headquartered in Charlotte, North Carolina. North Carolina split off from South Carolina in 1710, during Queen Anne’s reign. 19 years prior, a Scotsman named William Paterson loaned the Crown £1.2 million, becoming the Government’s exclusive banker. Thus, the mighty Bank of England was founded — by a Scot. An Englishman named Holland created the Bank of Scotland a year later.
Published under: Finance
Hot IPOs | 26 / 02 / 2008 | 0
Yesterday, an acquaintance asked me if I’d consider buying shares of Visa’s IPO. It’s really gotten people talking. As many of you know, MasterCard had an IPO in 2006 and shares were priced at $39. They’re now trading for $195, a 400% gain in less than two years. Hot IPOs are back. In my reading I came across another hot IPO that might surprise you: “I found a hot company with the most interesting story. It went public on July 4th at $25 per share. On its first day of trading, it jumped to $40, then $50. A month later, on August 10th, it was trading at $280 and on August 11th, it peaked at $310. The next day it fell to $212 and by the 15th it was down to $172, ending the year at $150. Amazon.com? Internet Capital Group? Yahoo!? Guess again. The year was 1791. The stock was the Bank of the United States, set up by Alexander Hamilton in 1790 to help restructure the new government’s $80 million of debt from the Revolutionary War and General Washington’s bar tab. And you just won’t believe it, but this hot IPO somehow ended up in the hands of 30 members of Congress, the Secretary of War and wealthy citizens. Some things never change.”
Published under: Finance, Politics
Stockbrokers’ Mayday | 25 / 02 / 2008 | 0
The stock market had once been Wall Street’s greatest source of revenues. Commissions were fat, fixed, and nonnegotiable. Each time a share changed hands, some broker somewhere took out a handsome fee for himself, without necessarily doing much work. A broker was paid twice as much for executing a two-hundred-share order as for a one-hundred-share order, even though the amount of work in either case was the same. The end of fixed stock brokerage commissions had come on May 1, 1975-called Mayday by stockbrokers-after which, predictably, commissions collapsed. Investors switched to whichever stockbroker charged them the least. As a result, in 1976, revenues across Wall Street fell by some six hundred million dollars. The dependable money machine broke down. -Michael Lewis, Liar’s Poker, page 62 Though it wasn’t too helpful to stockbrokers, the deregulation of the brokerage industry helped bring down fees and ultimately allowed people of more humble means to own common stocks. Some brokerage firms did benefit from the change, like the disruptive enfant terrible Charles Schwab. Schwab was the posterboy for discount brokerages and reigned supreme all the way up until brokerage fees took another fantastic fall toward zero with the advent of electronic trading over the internet.
Published under: Business, Finance, Quotes
Michael Bloomberg on Intrade | 25 / 02 / 2008 | 0
Intrade, a prediction market where you can make money by correctly predicting outcomes in political races, awards shows — even the weather — has a tradeable contract for Michael Bloomberg (my choice for America’s next president). Bloomberg has repeatedly denied that he’s running in 2008 as an independent, but that’s normal behavior for someone who has yet to declare their candidacy. Hillary Clinton herself jumped around the issue of her candidacy for years, denying it right up until she announced she’d run. Asked Monday at his regular news conference whether it’s too late for third-party candidates to be entering the race, Bloomberg gave a long answer that showed he is well-informed about the intricacies of ballot access rules. In recent months he has sought the advice of ballot access experts like Clay Mulford, who served as campaign manager for another billionaire third-party candidate, H. Ross Perot. These developments have been reason for the price of Bloomberg’s Intrade contract to rise in value, but most punters are still pegging the chances of his run at only about 10%. I think that’s an underpriced contract, and I’m considering buying some myself, though the low trading volume on the contract means I wouldn’t get far without drastically ballooning the contract price. Maybe I could find someone who’d enter a derivatives contract with me on this. Here’s a historical chart of the contract’s price (if Bloomberg runs, each contract picked up now for $0.10 pays out $1.00): Just for kicks, here is the graph of the Dem nominees:
Published under: Economics, Finance, Politics
Good Corporate Governance: Starbucks | 25 / 02 / 2008 | 0
I was perusing the 2008 Starbucks Proxy Statement in preparation for the upcoming shareholders meeting, and came upon this gem: Executive Stock Ownership Guidelines Minimum investment levels for each job title are: President and CEO - 5,000,000 The unrealized value of vested, in-the-money stock options counts for up to 25% of the required minimum investment. This is a fantastic way to ensure that all of the executives have their interests aligned. I think all organizations - no matter the size - should adopt rules like this one.
Published under: Business, Finance, Philosophy, Seattle
Goldman Strikes Out, Still Swinging | 22 / 02 / 2008 | 0
Reading this month’s issue of Institutional Investor Extra: Global Alpha, Goldman’s flagship quantitative hedge fund that began last year with $10 billion under management, continues to bleed assets following a 39 percent loss in 2007. The firm’s mathematical algorithms, which are designed to generate profit by capturing price discrepancies between stocks, stopped working in the equity market fallout from the subprime crisis. Goldman had to bail out another quant product, its Global Equity Opportunities Fund, with a $2 billion capital infusion in August when the subprime crisis caused big losses for that portfolio… …Goldman CFO David Viniar revealed that GSAM suffered client losses of about $3 billion in the fourth quarter, with close to half of that coming from Global Alpha. He also warned of more damage to come. “We think redemptions in the first quarter will be even greater,” Viniar told analysts. To help make up for that shortfall, Goldman is, gasp, launching a new hedge fund! Clearly, this will solve everything! Goldman Sachs Asset Management has raised roughly $7 billion for Goldman Sachs Investment Partners, a new long-short equity hedge fund. The offering is the largest hedge fund launch ever. “Goldman is undoubtedly the best hedge fund brand out there,” says James Hedges, president and CIO of Naples, Florida–based advisory firm LJH Global Investments. Really? The best? Well, why is it that their flagship products have gotten hammered? The article then gets even more gleeful, pointing to the successful hedge funds launched by guys who have left Goldman. Sure! Great! Let’s all put our money with Goldman Sachs - the guys who couldn’t stand it there have made it big! And their flagship fund was only down 39% last year! Goldman Sachs has a proven ability to make money when it’s their own money at stake. However, managing others’ money is a different story. I think people should take their meds regularly, and give their assets to dedicated asset managers, not the banks who should rightfully act as intermediaries.
Published under: Finance, No F***ing Way
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