This is GOLD. It’s a compilation of 160 of Arnold Schwarzenegger’s best quotes – everything from Terminator, Total Recall, and Conan, to Pumping Iron and him introducing “Abatar”.
When I was backpacking with Doz several years ago, somehow we got to talking about Total Recall and then started reciting some of the more memorable lines from it. It became a running joke between us – one of those silly things that cracked us up for some inexplicable reason. We went around Eastern Europe randomly repeating the line See you at the party, Richter! to each other and laughing uncontrollably. Then, at the end of the Europe leg, when we were staying in an apartment in Greece, we found out that the local TV station was going to screen Total Recall that night. We couldn’t believe the coincidence, and stayed in to watch it. Total Recall has never been as hilarious as it was that night. Anyway after that the practice kind of spread so that when we got back to Australia, a couple more of our friends started to drop random Arnie lines into conversation as well.
The New York Times has paid S$160,000 to settle a suit after Lee Kwan Yew, Lee Hsien Loong, and Goh Chok Tong threatened to sue it.
Last month, The Herald Tribune, wholly owned by the Times Company, published a column by Philip Bowring that referred to “dynastic politics” and listed the leaders of many countries, including Lee Hsien Loong, the prime minister, and his father, Lee Kuan Yew, a former prime minister.
The implication of nepotism did not please the Lees, and they went down the familiar route of threatening to sue – for libel, I’m guessing.
There is a bit of history behind this matter, reaching back to a similar incident in in 1994. Above the Law has a good summary of the event.
The Singaporean government obviously hasn’t lost its touchiness about being criticised. Given how long Singapore has been a developed economy, I wouldn’t hold out for China changing its current stance on censorship and free speech in a hurry. There’s no guarantee that economic development will mean a shift towards western socio-political values.
Sidenote: The three elder statesmen were represented by Davinder Singh SC. The last time I was in Singapore, I was told that he is a barrister that people have nicknamed the “Nuclear Weapon”. Incidentally, Wikipedia mentions that Singh won the Jessup in 1992, and all his teammates are now judges and/or SCs.
stuloh What the hell? It's raining again? I thought we were past this stage already, Bay Area weather. Lucky for me, I drove into work today...
As Apple stocks keep hitting all-time highs, much has been made recently of the rapidly decreasing gap between Microsoft and Apple’s respective market capitalizations.
At market close today, Microsoft had a market cap of about $259.5bn, compared to Apple’s $210.7bn. To catch up, Apple stocks would need to increase 23%, which would price them at roughly $286 a pop (assuming Microsoft’s price remains stagnant, which is not an unfair assumption, given the MSFT has been trading at about the level it is today since the start of 2001). Microsoft hit a record high market cap of nearly $600bn during the delusional dot com boom days – if it ever gets up there again, it will probably only be because of inflation.
Yet, when we look at the financials for calendar Q4, 2009, we see:
Net Income for the whole year was $14.57bn vs $8.24bn. I’m by no means well versed in reading financial statements, but it seems clear that although Microsoft’s revenue is 21% higher than Apple (about the same as the difference in market cap), Microsoft has way higher margins and is thus almost twice as profitable. And at the end of the day, it’s the profit that counts, right? (I don’t care if you have a turnover of $1bn – if you operate on razor-thin margins of 1%, then a company with margins of 30% that only generates $50m revenue is making substantially more dough than you.)
Microsoft also has a lot of cash & short term receivables in the bank: $35.1bn, compared with Apple’s $23.4bn at year end (although some later articles seem to report a $40bn cash horde), so both companies are healthy in that respect and relatively unleveraged.
The argument is that Apple, with a promising product pipeline, has a bright future ahead, with higher growth rates than Microsoft. The iPad of course opens up a new revenue channel for Apple, and product refreshes for the iPhone, Mac Pro, and Macbook Pro due out this year will keep kicking along revenue growth. And what’s exciting that’s on the horizon for Microsoft? There’s not much that comes to my mind.
But just how much will the iPad do for Apple? An analyst from Morgan Stanley optimistically forecasts iPad sales in 2010 of around 6 million (with shipments to intermediary sellers clocking in at up to 10 million). Let’s take an average selling price of $650 – roughly midway between the 16gb non-3G model and the 64gb 3G model, and you get revenue of about $4bn. Based on estimates of production costs, the materials and manufacturing cost roughly 40% of the retail price (gross margin of 60%). Other reports say the gross margin is only about 30%. Let’s be generous and estimate the net margin at 30%, and we get net profit on iPad sales of about $1.2bn. Still not that close to Microsoft’s net income, but getting there.
There’s a lot of excitement surrounding Apple at the moment, and I would be wary about the possibility of a mini-bubble forming around Apple stock. If Apple’s market cap reached Microsoft’s at some point this year… it would be difficult to say that there is not some mispricing happening somewhere.
In January this year, NPR’s Planet Money bought a portion of a mortgage bond for $1,000. It’s one of those toxic assets, and defaults have decimated the value of the bond since it was issued. NPR have got an infographic showing the returns on their investment, together with the status of the 2,000 or so underlying mortgages which comprise the CMO to which the bond belongs. They’ve even quaintly given their investment a name, Toxie.
If you listen to the podcast, they talk about the process of finding the bond (which took a couple days) and making the trade and how people do research on securitized assets today. Pretty interesting.
They also mention the prospectus for one of the mortgage bonds they look at, which was over 600 pages. (They find a dealbreaker on page 136: “In the event of insolvency of Lehman Brothers, payments due under the interest rate … agreement may be delayed, reduced, or eliminated.”) Ok, so I can understand why no one actually read those things (except perhaps for Mike Burry) but I really pity the lawyer who had to write the damn thing. Incidentally, I had a brief stint working as a securitization lawyer. One of the matters I was on required me to trawl through pages and pages of documentation for several CDOs. I can’t remember what the goal was – I think the client was trying to spin off the good parts of existing securities into new ones or something – but the documents were horribly drafted. They are difficult to read through at the best of times, but when the drafting is crap, the documents become excruciating. It was actually a really interesting area of work and I enjoyed learning about the concepts, but the devil was in the details.
A bit more poking around shows that the whole bond was initially valued at about $2.7 million. It recently traded at $36,000 (that’s a loss of almost 99%… ouch). It was issued by some entity called the Harborview Mortgage Loan Trust and the particular bond was apparently initially rated A- (which Moody’s regards as an investment grade security with “low credit risk”).
NPR will make their money back through interest payments if their bond isn’t wiped out within the year by mounting mortgagor defaults (if I understand things correctly, they won’t get their principal back at all – at the tier their bond is at, the principal is already gone). It’s basically a timebomb.
Good idea, NPR. I’m surprised that no journo did this last year!
In The Big Short, Michael Lewis takes us through the GFC from the perspective of the people who saw it coming – an autistic doctor who ended up managing a $600 million fund that returned 489% (net of fees) over about 8 years, three guys who turned $110,000 into $135 million, a Deutsche Bank trader, and Steve Eisman. CDS buyers, and CDO and equity shorters.
Lewis took a while to write this book, and there have been many describing the GFC that have already been published. It’s definitely a good read, and written in Lewis’ typical entertaining, engaging style, but I didn’t find it as memorable as some of his earlier books (although there were still a handful of great passages scattered in there).
This great WSJ article writes about some of the rich and famous who got rejected from their first university of choice. Included is a Nobel laureate in Medicine who got rejected from Harvard Med, twice. And Warren Buffett:
Rejections aren’t uncommon. Harvard accepts only a little more than 7% of the 29,000 undergraduate applications it receives each year …
“The truth is, everything that has happened in my life…that I thought was a crushing event at the time, has turned out for the better,” Mr. Buffett says. With the exception of health problems, he says, setbacks teach “lessons that carry you along. You learn that a temporary defeat is not a permanent one. In the end, it can be an opportunity.”
Mr. Buffett regards his rejection at age 19 by Harvard Business School as a pivotal episode in his life. Looking back, he says Harvard wouldn’t have been a good fit. But at the time, he “had this feeling of dread” after being rejected in an admissions interview in Chicago, and a fear of disappointing his father.
As it turned out, his father responded with “only this unconditional love…an unconditional belief in me,” Mr. Buffett says. Exploring other options, he realized that two investing experts he admired, Benjamin Graham and David Dodd, were teaching at Columbia’s graduate business school. He dashed off a late application, where by a stroke of luck it was fielded and accepted by Mr. Dodd. From these mentors, Mr. Buffett says he learned core principles that guided his investing. The Harvard rejection also benefited his alma mater; the family gave more than $12 million to Columbia in 2008 through the Susan Thompson Buffett Foundation, based on tax filings.
Most of them got rejected from Ivies to go to… another Ivy, but, whatever.
Radio silence has been because of visitors visiting from out of country. We now return you to our semi-regular scheduled programming.
For now, some rapid-fire links:
People have wondered if Stanford paid for that placement, but it turns out that not only did Stanford not pay for it, no one even asked it for permission before featuring Sigourney Weaver’s character’s avatar’s logo-adorned cardinal-colored tank top in the film.
Lapin has received a fair number of calls about Avatar since the movie’s release. “People have asked if we paid for the reference,” she says. “There are universities that do that, but we do not; we don’t even provide the shirts. We send them to the Bookstore.”
That’d be right. They stick a big “S” on something and suddenly the $10 hoodie you can buy from Walmart is $50 in the bookstore. Of course, Stanford is quick to say that if it had been asked, “it absolutely would have been something we would have approved.” Naturally. The estimated value of free publicity is nothing to sneeze at:
The value of being seen in a box-office hit of such magnitude “is obviously massive,” says Jeff Greenfield, editor of the online newsletter Product Placement News. A quick back-of-the-envelope calculation (figuring a total of 30 seconds of movie exposure, times the likely total box office, DVD and broadcast TV impressions, times the typical cost of a 30-second U.S. TV advertisement per thousand views) has him estimating, very conservatively, that the Cardinal shirt represents around $3 million in advertising value to the school.
The real reason for the Farm’s appearance in the film is because Sigourney Weaver is a Stanford alumna and it was her idea.
Dad recently wrote me an email which got onto the topic of Alistair Cooke:
Years ago, whenever I could, I would tune to the BBC on short wave radio [from Singapore], and listen to Alistair Cooke’s Letter From America, with its accompanying static and waning and waxing signal strength (no internet radio then). It was a 15 minute weekly radio broadcast by him touching on his observations in America. He was a Britisher who emigrated to the States in the 1930s and settled in New York. His program started in the 1940s and ran continuously for nearly 60 years till just before his death in 2004 at a ripe old age of 95.
A few years ago, I bought a book which is a compendium of some of his “Letters to America”. Reading it, somehow it was not as enjoyable as hearing him speak on the radio. Thankfully throughout all these years he never manage to lose his British accent.
After 58 years of broadcasts, Letter from America remains the longest running speech radio show in the world. This is Cooke’s first letter and his last letter. There are audio links on those pages too so you can hear his voice. Good stuff.
The ABA journal has an interesting article about the late Chief Justice Rehnquist. I’m not sure I could picture what a CJ’s weekend would look like, but in any event, this wasn’t it.
Bill’s loneliness after the death of his wife, Nan, in 1991 was apparent to anybody who saw him regularly. He did not try to hide it.
At our Sunday morning tennis games, I could tell that Saturday nights were the loneliest of the week for him. After routine greetings, he would almost always ask what my wife, Betty Nan, and I had done the previous evening. I would describe a typical suburban couple’s Saturday night (dinner with friends, neighborhood party, movies, a charity event, etc.). Bill would then sometimes tell me about a quasi-official party that sounded glamorous but that he found tedious. More often he would describe a dinner of hot dogs, canned vegetables and ice cream followed by an evening with the TV remote. (For more than a dozen years he prepared most of his own meals, but he always considered cooking a chore, rather than a creative pleasure.)
Quite sad, but very human. It turns out that the Chief Justice loved to bet, as well:
Betty Nan, Bill and I began betting on elections shortly after the death of Bill’s wife, Nan, in 1991. In the beginning, it was simple. We each bet $1 on one or two close races, shook hands and paid off the next time we had dinner together. But in a few years, without deliberate planning, the scope of our betting expanded. The money involved remained insignificant. The wagering terms, however, became complicated. On some Election Days we each wagered a dollar on two dozen or more individual races. To add complexity and variety to our game, we changed the terms regularly. Sometimes we simply chose a winner. More often we wagered on spread, voter percentage or by what percentage each party would win in a legislature.
After our election cards grew lengthy and complicated, it became necessary to record our bets in writing. Conversation on movie dates during October often focused on how we would organize our betting cards for an upcoming election. The arrangement by which we exchanged our picks was efficient and easy. Betty Nan and I faxed our selections to Bill’s secretary and, after receiving our choices, she faxed Bill’s to us. This allowed the bettors to keep their choices secret.
I had some reticence about using the chambers of the chief justice of the United States as a betting parlor. But when I questioned Bill about it, he brushed me aside. “Janet loves being part of all this,” he explained.
A while ago I linked to a video of Obama slagging off the Supreme Court at the State of the Union address in front of several of the Court’s judges. Chief Justice Roberts, speaking at the University of Alabama, has just commented on it:
Responding to a University of Alabama law student’s question, Roberts said anyone was free to criticize the court, and some have an obligation to do so because of their positions.
“So I have no problems with that,” he said. “On the other hand, there is the issue of the setting, the circumstances and the decorum.
“The image of having the members of one branch of government standing up, literally surrounding the Supreme Court, cheering and hollering while the court — according the requirements of protocol — has to sit there expressionless, I think is very troubling.” …
Roberts told the students he wonders whether justices should attend the speeches.
“I’m not sure why we’re there,” said Roberts, a Republican nominee who joined the court in 2005.
Justice Antonin Scalia once said he no longer goes to the annual speech because the justices “sit there like bumps on a log” in an otherwise highly partisan atmosphere. Six of the nine justices attended Obama’s address.
The full article is here.
Meridee Moore founded Watershed Asset Management, a San Francisco-based hedge fund manging $2 billion. Moore is a Yale Law graduate who moved into finance after 18 months at biglaw firm Simpson Thacher.
The NY Times article reveals some interesting answers:
Q. How do you hire?
A. We look at grades and scores, of course. We want the person to be competitive. Also, if the person has had a rough patch in his or her past, that’s usually good.
A. Well, if you’ve ever had a setback and come back from it, I think it helps you make better decisions. There’s nothing better for sharpening your ability to predict outcomes than living through some period when things went wrong. You learn that events aren’t in your control and no matter how smart you are and how hard you work, you have to anticipate things that can go against you.
Q. What are some other screens?
A. We give people a two-hour test. We try to simulate a real office experience by giving them an investment idea and the raw material, the annual report, some documents, and then we tell them where the securities prices are. We say: “Here’s a calculator, a pencil and a sandwich. We’ll be back in two hours.” If an analyst comes in there and just attacks the project with relish, that’s a good sign.
Q. Is this one of those impossible tests, where you’re asking them to do seven hours of work in two hours?
A. Yes. But you’d be amazed at how well people do. After two hours, two of us go in and just let the person talk about what he’s done. The nice thing about my being trained as a lawyer, and never going to business school, is that I’m able to ask the basic, financially naïve questions, like: “What does the company do? How do they make money? Who are their customers? What do they make? How do they produce it?” That throws some people off.
Q. What else do you ask job candidates?
A. I try to ask something that inspires the person to talk a little bit about their family, whether it’s their brother and sister, their parents, where they lived. And usually it’s, “Why do you want to be in San Francisco?” And they’ll say, “Oh, well I have an uncle in the East Bay.” And I’ll say, “Oh really? What does your uncle do?”
I find that guys who have had strong relationships with women — whether it was their mother, their sisters, a teacher — tend to be secure in who they are, and tend to do well in our business.
Q. Why is that?
A. Well, they have to work with me, for one thing. And they have to be able to challenge others and have me challenge them without taking it too personally.
The other question I ask is if they’ve ever been in anyone’s wedding party. If someone has asked them to stand next to him on the most important day of his life, at least one person thinks they are responsible. It means they’ve been able to establish and continue a relationship. It’s not always true, but if you build strong relationships with people, you tend to go into a management meeting or a negotiation and come out of it with some respect. You go into it thinking: “I’m going to leave this situation better than I found it. I don’t have to kill everybody to get to the right result for myself.” These are good qualities in a person and a partner.
Q. What’s your best career advice to somebody just graduating from undergrad or B-school?
A. Find a mentor. And it doesn’t have to be a mentor who looks like you. They can be older, a different gender, younger, in a different business, but someone you admire and respect, and just attach yourself to that person and learn everything you can. I’ve done this my whole career. It is so valuable, especially if you choose a good one and they end up teaching you everything and then rejoicing in your success.
Actually, the whole of NYT’s Corner Office section has some pretty interesting reading.
Cal Henderson explains the maths behind his WoW addon, which calculates the “drop chances” of game items. The maths is not particularly complicated, but it’s a novel way of explaining some probability concepts. He uses the 0.01% drop rate of the game’s rarest pet, the Hyacinth Macaw to deliver some of his examples. Incidentally, the Macaw goes for an average price of about 7,000 gold pieces in the auction house, which is about US$50. Apparently, it’s been bought for as much as 75,000 gp (US$500). A real Hyacinth Macaw costs somewhere in the region of $10,000.
The thing which governs this is called Probabilistic Independence – the fact that whether one mob dropped the loot or not, this has no bearing on whether a second mob will drop the loot. By extension, having looted 1000 consecutive mobs which did not drop the loot has no effect on the next mob you loot. If the drop chance is 1 in 100, there will still be a 1 in 100 chance that the next mob you loot will drop the item.
But if you use BunnyHunter and loot 1000 mobs that drop the Azure Whelp [with a 1 in 1000 drop rate], it wont say 100%; it’ll say 63.2%. The reason we can come up with any number at all, is because we can derive the probability that a piece of loot will drop at least once in a given sequence of lootings.
I have Michael Lewis’ upcoming book, The Big Short on pre-order at Amazon. Vanity Fair has an excerpt from it. Here’s an excerpt from the excerpt:
A lot of hedge-fund managers spent time chitchatting with their investors and treated their quarterly letters to them as a formality. Burry disliked talking to people face-to-face and thought of these letters as the single most important thing he did to let his investors know what he was up to. In his quarterly letters he coined a phrase to describe what he thought was happening: “the extension of credit by instrument.” That is, a lot of people couldn’t actually afford to pay their mortgages the old-fashioned way, and so the lenders were dreaming up new financial instruments to justify handing them new money. “It was a clear sign that lenders had lost it, constantly degrading their own standards to grow loan volumes,” Burry said. He could see why they were doing this: they didn’t keep the loans but sold them to Goldman Sachs and Morgan Stanley and Wells Fargo and the rest, which packaged them into bonds and sold them off. The end buyers of subprime-mortgage bonds, he assumed, were just “dumb money.” He’d study up on them, too, but later.
He now had a tactical investment problem. The various floors, or tranches, of subprime-mortgage bonds all had one thing in common: the bonds were impossible to sell short. To sell a stock or bond short, you needed to borrow it, and these tranches of mortgage bonds were tiny and impossible to find. You could buy them or not buy them, but you couldn’t bet explicitly against them; the market for subprime mortgages simply had no place for people in it who took a dim view of them. You might know with certainty that the entire subprime-mortgage-bond market was doomed, but you could do nothing about it. You couldn’t short houses. You could short the stocks of homebuilding companies—Pulte Homes, say, or Toll Brothers—but that was expensive, indirect, and dangerous. Stock prices could rise for a lot longer than Burry could stay solvent. …
The vehicle for Lewis’ tale turns out to be an ex-Doctor with a very interesting background.
By the time Burry moved to Stanford Hospital, in 1998, to take up his residency in neurology, the work he had done between midnight and three in the morning had made him a minor but meaningful hub in the land of value investing. By this time the craze for Internet stocks was completely out of control and had infected the Stanford University medical community. “The residents in particular, and some of the faculty, were captivated by the dot-com bubble,” said Burry. “A decent minority of them were buying and discussing everything—Polycom, Corel, Razorfish, Pets.com, TibCo, Microsoft, Dell, Intel are the ones I specifically remember, but areyoukiddingme.com was how my brain filtered a lot of it I would just keep my mouth shut, because I didn’t want anybody there knowing what I was doing on the side. I felt I could get in big trouble if the doctors there saw I wasn’t 110 percent committed to medicine.” …
He’d moved back to San Jose, buried his father, remarried, and been misdiagnosed as bipolar when he shut down his Web site and announced he was quitting neurology to become a money manager. The chairman of the Stanford department of neurology thought he’d lost his mind and told him to take a year to think it over, but he’d already thought it over. “I found it fascinating and seemingly true,” he said, “that if I could run a portfolio well, then I could achieve success in life, and that it wouldn’t matter what kind of person I was perceived to be, even though I felt I was a good person deep down.” His $40,000 in assets against $145,000 in student loans posed the question of exactly what portfolio he would run. His father had died after another misdiagnosis: a doctor had failed to spot the cancer on an X-ray, and the family had received a small settlement. The father disapproved of the stock market, but the payout from his death funded his son into it. His mother was able to kick in $20,000 from her settlement, his three brothers kicked in $10,000 each of theirs. With that, Dr. Michael Burry opened Scion Capital. (As a teen he’d loved the book The Scions of Shannara.) He created a grandiose memo to lure people not related to him by blood. “The minimum net worth for investors should be $15 million,” it said, which was interesting, as it excluded not only himself but basically everyone he’d ever known.