stuloh Temptation to get an iPad is building, despite all my previous remarks...
(0)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.
(0)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 Check out the directions Google Maps Oz is spitting out today: http://bit.ly/cL7ZKG ... Strine ftw!
(0) 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:
| Microsoft | Apple | |
| Revenue (billions) | $19.0 | $15.7 |
| Gross Profit | $15.4 | $6.4 |
| EBIT | $8.5 | $4.7 |
| Net Income | $6.6 | $3.4 |
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).
Spoilers after the jump.
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(0)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:
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