Bill Gates recently (about a month back) gave a speech at a High School about 11 things they did not and will not learn in school. He talks about how feel-good, politically correct teachings created a generation of kids with no concept of reality and how this concept set them up for failure in the real world.
Rule 1 : Life is not fair - get used to it!
Rule 2: The world won't care about your self-esteem. The world will expect you to accomplish something BEFORE you feel good about yourself.
Rule 3: You will NOT make $60,000 a year right out of high school. You won't be a vice-president with a car phone until you earn both.
Rule 4: If you think your teacher is tough, wait till you get a boss.
Rule 5: Flipping burgers is not beneath your dignity. Your Grandparents had a different word for burger flipping: they called it opportunity.
Rule 6: If you mess up, it's not your parents' fault, so don't whine about your mistakes, learn from them.
Rule 7: Before you were born, your parents weren't as boring as they are now. They got that way from paying your bills, cleaning your clothes and listening to you talk about how cool you thought you were. So before you save the rain forest from the parasites of your parent's generation, try delousing the closet in your own room.
Rule 8: Your school may have done away with winners and losers, but life HAS NOT. In some schools, they have abolished failing grades and they'll give you as MANY TIMES as you want to get the right answer. This doesn't bear the slightest resemblance to ANYTHING in real life.
Rule 9: Life is not divided into semesters. You don't get summers off and very few employers are interested in helping you FIND YOURSELF. Do that on your own time.
Rule 10: Television is NOT real life. In real life people actually have to leave the coffee shop and go to jobs.
Rule 11: Be nice to nerds. Chances are you'll end up working for one.
Monday, October 15, 2007
rules of life
Free markets ... NOT
http://dummyspots.com/2007/09/jon-stewart-and-alan-greenspan-best-interview-ever/
Alan Greenspan made an appearance on The Daily Show to plug his new book, but instead of the shallow, softball exchange he may have been expecting, Jon Stewart knocked him back on his heels with one of the most insightful interviews I've ever heard. They covered the myth of the Free Market, the Gold Standard, the Fed's role in controlling the quantity of fiat money, inflation, irrational exuberance… all in the span of about 5 minutes and all in a comedic context. The coup de gras is when Greenspan admits that even with all the complex mathematical models, neither he nor anyone else is any better at forecasting now than they were 50 years ago!
<…>
Stewart: When you say "Open Market," I always wonder… Why do we have a Fed? Wouldn't the market take care of interest rates and all that? Why do we have someone adjusting rates if we are a free market society?
Greenspan: We didn't need a central bank when we were on the Gold Standard…[Conspiracy theorists note- the Fed was created 20 years BEFORE we decoupled from the Gold Std -Ed.] …people would buy and sell gold and the markets would do what the Fed does now… but by the 1930s most everybody in the world decided that the Gold Standard was strangling the economy and universally the Gold Standard was abandoned… …you need somebody out there or some mechanism to determine how much money is out there because the amount of money in an economy relates to the amount of inflation…
Stewart: So we're not a free market then- there is an invisible, there is a "benevolent" hand that touches us…
Greenspan: Absolutely, you are quite correct. To the extent that there is a central bank governing the amount of money in the system, that is not a Free Market, and most people call it regulation [ this statement should forever be enshrined as a quote- Ed].
Stewart: When you lower interest rates, it drives money to stocks and lowers the return people get on savings.
Greenspan: Yes, indeed.
Stewart: So they've made a choice - "We would like to favor those who invest in the stock market and not those who [save] "…
Greenspan:That's the way it comes out, but that's not the way we think about it.
Stewart: Explain that to me. It seems to me that we favor investment, but we don't favor work. The vast majority of people work, they pay payroll taxes, and they use banks. And then there's this whole other world of hedge funds and short betting… y'know, it seems like craps. And they keep saying, "No no no, don't worry about it, it's Free Market, that's why we live in much bigger houses." But it really is, it's the Fed, or some other thing, no?
Greenspan: I think you'd better re-read my book. [trying to work the plug into the surprising line of questioning- Ed.]
Friday, September 07, 2007
Work less (make less) be happier
http://finance.yahoo.com/expert/article/careerist/43903
Wow this article sure has some very interesting insights (on issues that at least I was not aware of).
"Powdthavee shows how to calculate how much money you need to earn in order to replace the happiness from a close relationship. He concludes that for the same amount of time spent, you get more fulfillment from nurturing relationships than from earning money."
Tuesday, August 28, 2007
The last few weeks of hearing all bad news all around financial markets, made me think is the world is going to be destroyed pretty soon. Is this the Apocalypse? I mean, why is there so much of panic when a casual glance at the current situation doesn't seem to be bad, at all.
1. American households earn average of 75K/year and buy house at an average rate of $300K that is just 4 times the annual income, and in many rich neighborhoods that earn in 6 digits this ratio could be even less. So, is the house price sky-high? Is the ratio change too much in America's history? Are other countries better? Brits and Europeans whose average house price is like 10 times the annual house-hold salary seem to worry much less even at the back of a 3x price growth in 10 years. In Asian countries like India, this ratio could get even higher. I don't know about Africa and South America, but think that they wont be any better in owning houses than America.
2. Current America has a very healthy corporate cycle and unemployment rates are almost historically low. The last housing bust was at the back of big unemployment.
3. The subprime mortgages are still a small portion of total value of American housing assets and not all of them are defaulting and not all the defaulted properties have a value of 0.
4. By the very nature of the American economy, the risks are well spread out and markets are pretty deep and matured compared to almost any other country. Agreed that there is a lot of unnecessary froth at the top, but derivatives in essence builds a very strong foundation and links the stakeholders.
5. The world economy never looked so better and not all of it is based on cheap mortgage. There are quite a bit of fallbacks, unlike the previous times. Even taking the factors that are dependent on US consumption, the consumption of many Asian countries have increased sharply and Russia is back on its knees.
6. Most importantly, unlike in most other times of American history, there are a quite of bit of non-market entities that are extremely powerful and they would like to maintain status quo and have the means to do it. The foreign reserves of Japan, China, India and Korea alone are in the range of $3 trillion and each of them is much bigger than any institutional or individual player in the market and they understand the stakes. If US goes into recession or if there is a reduction in interest rates, there could be losses of hundreds of billions here alone. So, would it be stretch to assume that a couple of hundred billion dollars could get diverted by these power central banks into US mortgage and bonds to save American economy from collapsing, while making strategic buys with high yielding interests. For these central banks few billion dollars are pocket change and they have quite a bit of powers in their arms. They are silently watching and if there is a definite case of collapse, there could be a lot of invisible hands at work to clean the mess.
US is so crucial to the world economy that not many of the powerful hands will allow it to drop. And the fundamentals seem to be good – its not like inflation is going into double digits or corporate are throwing out people in mass numbers. Few hedge fund owners and a few greedy subprime buyers are fried, but I don't understand why the market value should drop by few trillion dollars.
Tuesday, August 21, 2007
once in 10,000 years happened every day for three days."
"Wednesday is the type of day people will remember in quant-land for a very long time," Rothman told the Wall Street Journal "Events that models only predicted would happen once in 10,000 years happened every day for three days." http://www.dealbreaker.com/2007/08/quant_bloodbath_revisited_a_pr.php
"The pressure to generate returns in what was a low-return environment has without doubt caused investors to go into less liquid spaces. In the past those less liquid parts of the credit markets had mostly long-term investors in them. Now they are mostly short-term investors, who are facing a liquidity crisis."
Some of the earliest quantitative investment methods included the successful identification by Benoit Mandelbrot, the Yale mathematics professor, of patterns in cotton prices in the 1960s, writes Anuj Gangahar. FT repeated in http://www.msnbc.msn.com/id/20267284/
Nassim Taleb:
emphatically rejected the [central limit theorem], and the entire "Gaussian" approach as applicable to social and economic reality. . . . He pointed out ... that the fractal approach, which does not give precise probabilities, is much more applicable to social reality because it does not arbitrarily dismiss inconvenient events as "outliers." For example, according to Taleb, the Crash of 1987, the proverbial Black Swan to Gaussians, "is not an outlier if you use a fractal with an exponent of 3." (In the Gaussian world the Crash of 1987 was 20 standard deviations from the mean, an episode that would occur "every several billion lifetimes of the universe.") Taleb went on to argue that Mandelbrot's fractals allow us to account for a few Black Swans, although by no means all, and transform them into Gray Swans or "known unknowns." Taleb also produced a startling graph showing that in the last 50 years the ten most extreme days in the financial markets represent half the returns. And yet these Black Swans are dismissed by Gaussians. Taleb concluded that those using sigmas (standard deviations) as a measure of risk and randomness in the world of finance were practicing "phony mathematics" and were "charlatans." http://organizationsandmarkets.com/2006/11/15/randomness-and-the-black-swan/
Monday, August 20, 2007
Countrywide -- Too Big to Fail ?
http://www.businessweek.com/print/investor/content/aug2007/pi20070819_751874.htm
News Analysis August 20, 2007, 12:01AM EST
Did Countrywide Get a Hand from the Fed?
The central bank's discount-rate cut probably wasn't aimed directly at the lender, but the move may have helped save it from bankruptcy
The question was all over Wall Street last week: Was the credit crunch threatening the survival of Countrywide Financial ( CFC) (see BusinessWeek.com, 8/15/07, "Mortgage Lenders: Close to the Edge?")? A bankruptcy filing by the largest U.S. mortgage lender would have jolted the economy, squeezing Countrywide's many creditors and tormenting the already wounded mortgage and housing markets.
Friday, August 17, 2007
Undervalued Stocks based on Graham's Number (Net Current Asset Value).
 Ticker | Avg Vol | Last | NCAV | 66%NCAV | Price%NCAV | OCF/Shr | D/E |
|---|---|---|---|---|---|---|---|
| IFTH.OB | 1974 | 0.18 | 0.33 | 0.22 | 54.37 | 0.07 | 0.5 |
| MHO | 240989 | 21.61 | 37.06 | 24.46 | 58.31 | 6.81 | 0.72 |
| TAIT | 3104 | 1.80 | 2.98 | 1.97 | 60.42 | 0.10 | 0.03 |
| TWMC | 80920 | 4.71 | 6.73 | 4.44 | 70.03 | 0.86 | 0.19 |
| UTSI | 4035790 | 3.33 | 4.64 | 3.07 | 71.69 | 3.62 | 0.44 |
| AAC | 266373 | 0.18 | 0.25 | 0.16 | 73.39 | 0.01 | 0.13 |
| SPOR | 4011 | 3.72 | 4.88 | 3.22 | 76.25 | 0.06 | N/A |
| LKI | 4065 | 7.00 | 8.90 | 5.87 | 78.66 | 1.76 | 1.19 |
| CRC | 5302 | 6.25 | 7.81 | 5.15 | 80.06 | 0.93 | N/A |
| BSHI.OB | 823 | 7.70 | 9.54 | 6.30 | 80.72 | 2.62 | 0.08 |
| HDL | 160836 | 3.38 | 3.99 | 2.63 | 84.81 | 1.12 | 0.45 |
Will subprime meltdowns send markets into free fall? Expert opinions.
Super nice sequence of opinions from Buffett, Miller, Paulson, etc… on this topic.
http://money.cnn.com/galleries/2007/fortune/0708/gallery.crisiscounsel.fortune/5.html
पीपुल run at Countrywide Bank
http://www।ajc.com/business/content/business/stories/2007/08/17/countrywidebank0817.html
At Countrywide Bank offices, in a scene rare since the U.S. savings-and-loan crisis ended in the early '90s, so many people showed up to take out some or all of their money that in some cases they had to leave their names.
In west Los Angeles, a Countrywide supervisor brought in from another office served coffee to more than 25 people waiting calmly for their turn with the one clerk who could help them.
Bill Ashmore drove his Porsche Cayenne to Countrywide's Laguna Niguel office and waited half an hour to cash out $500,000, which he then wired to an account at Bank of America.
"It's because of the fear of the bankruptcy," said Ashmore, president of Irvine's Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees.
"It's got my wife totally freaked out," he said. "I just don't want to deal with it. I don't care about losing 90 days' interest, I don't care if it's FDIC-insured — I just want it out."
Central Banks to the rescue ...
After injecting $130.7 billion into the market yesterday, the European Central Bank added an additional $83.8 billion today. The added capital comes on the back of Japan's central bank injecting $8.4 billion and the U.S. Federal Reserve doling out $24 billion.
One hundred billion dollars here, $80 billion there, and soon you're talking about real money. Make sure you own some gold and silver, folks...
The SEC will begin tearing through the books of the five largest banks on Wall Street, checking for subprime exposure. In particular, the SEC is checking to see if the banks calculate the value of their subprime assets and customer assets in a consistent way. What's your guess?
Financial stocks are now at their cheapest point in a decade. The subprime scare has erased $600 billion, 8%, of value from the financial sector – the worst of any industry. Financials are now trading at 11 times earnings, the lowest since 1995.
Permabear Marc Faber, publisher of the Gloom Boom & Doom report, is calling for benchmark indexes to fall by 30%. He believes the Dow Jones Industrial Average will fall below 12,000. Faber also predicts that the bailout by central banks will cause severe inflation... see above.
Another stock Owens Corning Sales, Inc. (OC)
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How to invest like Bear Stearns
Let me explain what is happening to these hedge funds. The "holy grail" for hedge funds is to return 1% a month with no volatility. The saying is, "If you can return 1% a month, you can raise $1 billion," and that's true. But it's impossible to get 1% a month without enormous risk.
Here's the trade that hedge funds started making about two to three years ago to get that 1% a month. They would borrow money at the short end of the curve and they would then buy (lend) subprime paper. So they would borrow at 5.5% and lend as low as 6.5%. The difference was only 100 basis points because that trade got very crowded.
And that was the problem.
The problem is not that there are defaults; the defaults are exactly what one would expect from subprime lenders who had never borrowed before. The problem is that the paper was yielding only 6.5%.
What makes a spread of just 1% a good trade? Well, leverage it up 12-to-1, and you make your 1% a month. And that's the problem: An 8% decline in subprime paper, and your fund is wiped out. Wiped out.
Thursday, August 16, 2007
Countrywide questions and answers
Salesforce.com results
"subscription and support revenue" = $160 million and "professional services" = $16.6 million
3,000 net new customers during the quarter; total customer count "roughly 35,300"
subscribers passed the 800,000 ("customer" = a company and a "subscriber" = one of the employees of the customer
ASPs = 'high 60's to low 70's" [i.e, ARPU]
capital spending down from Q1 to finish the second quarter at roughly $10 million -- capital expenditures more than tripling year over year,
gross margin = 77%
operating expenses = 75% of revenue [what is wrong with this picture? - SAC/CPGA and support costs 75 cents on the sales dollar]
GAAP operating margin = 2%, up from breakeven in Q1 and up from a loss of 1% last year.
Net income = $3.74 million- all the huff from Marc Benioff and they bring in a bit over million in earnings a month. This supporting a $4.75 billion market cap? Loads of inside sellers: http://finance.yahoo.com/q/it?s=CRM
Churn "under 1% a month"
As a percent of revenue, G&A has fallen 170 basis points and marketing 160 basis points from a year-ago quarter.
deferred revenue on the balance sheet to $321 million
Marc Benioff: "One thing that no competitor can match these days is the Salesforce Platform, which gained dramatic momentum in the second quarter. We logged our first 100-million transaction day in the quarter and for the period. Our transactions totaled approximately 6.8 billion, a new record. While we delivered 119% more transactions this quarter, we delivered them at an average time of less than 0.25 seconds each, a 22% year-over-year improvement in speed. More remarkably, we delivered all this performance at greater than 99.9% availability. Of course, it's all available for you to see every day at trust.salesforce.com. None of our competitors; not Microsoft, not Oracle, not SAP provides this level of transparency or even the kind of website that we've made popular at trust.salesforce.com....calls to our API accounted for more than half of our transactions, indicating deeper and deeper integration with our service. That integration capability took a big leap forward this quarter, with our introduction of Salesforce SOA. This is a powerful set of technologies for enterprises as they continue to move to on-demand. We had our first-ever developer conference back in May, and now our developer community numbers more than 48,000. On the AppExchange, 348 ISVs have contributed to the 642 applications now available. Customers have now completed more than 251,000 test drives and 32,000 installs of on-demand applications from the AppExchange. Our platform is where partners go to build their own businesses into the next Salesforce.com. "
http://money.cnn.com/news/newsfeeds/articles/prnewswire/AQW07715082007-1.htm
Ensco International Inc
I bought (Ensco International Inc) yesterday. the order was placed long time back when i did some analysis on the stock. the stock seems cheap I am not sure why its falling.
Here are some numbers about it from finance.yahoo.com
P/E (ttm):8.77
Forward P/E (fye 31-Dec-08) 1:6.44
Growth
Past 5 Years (per annum) 69.237%
Next 5 Years (per annum) 22.59%
| Return on Assets (ttm): | 17.31% |
| Return on Equity (ttm): | 28.63% |
Still think you are in bull market?
Well you first have to ask what is your time frame. However if we are looking at the major market, closing below the 200 day moving average is generally considered a bear market. If we get below the 500 day moving average that would be a depressive market. All markets have waves within waves. A few days ago we had the "kiss goodbye" which was a intermediate term swing upward in the larger down market. Day traders only want volatility since they go flat at the end of every day. Intraday movements are generally not significant so focus on the close. Intraday movements generate a candle pattern that will give you hints about the current market. Today the S&P gapped down on open….. again….. which is generally a very bearish sign. Today also closed right on a Fibonacci retracement point.*IF* the market is going to turn it generally does so on one of these points. But only time will tell. What does this all mean? First, we are definitely not in a bull market. I might have been willing to say we were consolidating because there have been some doji''s and reversals. This indicates market indecision. However today we closed lower than we have been since March and below the consolidation area. There have been some other bearish candle patterns in the mix