Monday, June 29, 2009

Amazon Gives Finger to Taxman

Many states are finding that they have a revenue shortfall. Like any government, many are jumping to the simple answer. Get tax revenue anywhere you can find! For many states, they have looked at the taxes that they lose from online sales to try and make up the difference. A few weeks ago, New York issued a law that stated that despite the fact Amazon did not have any physical presence in the state, Amazon was obligated to charge New York residents taxes because of Amazon's affiliate relationship.  I am an Amazon affiliate.  I sometimes link to Amazon when I'm I want to talk about books I like or products I just bought.  New York reasoned that I as an affiliate represent a physical presence for Amazon.  I couldn't disagree with this more.

In New York, Amazon succumbed.  They now charge taxes to NY state residents even though Amazon has no physical location in the state.  When I originally read this, I was rather disappointed as I was hoping Amazon would not back down from a fight.  (In reality they haven't.  They are appealing the decision but complying for now).  But Amazon has now drawn a line in the sand.  North Carolina was about to pass similar legislation and rather than just start collecting taxes, Amazon decided to cut ties with all of its North Carolina associates.  They are planning to do the same thing in Hawaii.

This is a perfect example of government doing something extremely dumb that helps absolutely nobody.  The state will collect no additional revenue from taxes.  You could actually argue that they will lose some revenue since they will collect less income taxes from Amazon affiliates. The state might be able to collect some revenue from smaller retailers, but this will be offset by the damage they do to consumers who now have less money to spend at a time where they have less money in the pocket.

I really hope Amazon continues to take a firm stand.  I hate the fact that government often feels like it can dictate how private companies must operate.  While I think this situation is in the slightly gray area, I think the principal remains the same.  Private companies should not take "government mandates" lying down.  I often felt this way with Microsoft and the EU.  Even though I know it would never happen, I would love to see what would happen if Microsoft, rather than comply with all the EU monopoly rulings, just said, "Fine, we will stop selling Windows and Office in Europe".  I'm not sure who would be hurt more, but it would be something I would love watch unfold.

Tuesday, June 23, 2009

Crunch Time

It's crunch time at work.  Actually it has been crunch time for a while.  I have had to work, and make my staff work, for seven straight Saturdays.  the strain is starting to show.  I see my team sniping at each other more than usual and people just having general signs of burn out.  We will pull back a little bit, we are almost at the finish line, but that is when you have to sometimes push the hardest.

Post might be a little sporadic from me in the next few days.  The hours at work are just getting in the way of being able to write good blog post.

Just to keep you updated, I did add a small position in SRS.  The ETF promptly dropped 4% after I bought it.  I was about to sell out of it, but once again work got in the way.  Lucky for me, the stock rebounded slightly and is now down only 1% from where I bought it.  Depending on what the market does tomorrow, and if I have the time, I might just get out of the trade.

Wish me luck over the next few days.  Work is going to get crazy.

Monday, June 22, 2009

Is It a Market Reversal

Is the turn I've been waiting for finally happening?

The market has continued its downward trend that it started last week.  The broad market was down almost 3% today.  This looks particularly bad when you compare it to the uptrend we have experienced. Are people finally waking up to the fact that markets should not run up 40% in a few months?  There is a saying in trading, don't fight the tape.  It was one of the reasons I could not get more short the market as it ran up and up.  The market wanted to rally and I had no desire to stand in front of it.   It is what makes it so hard to short this market.  We had such a sustained run up that shorting now could be suicide.

I'm not sure I would short from here.  If I were to short from here, I would get in and out quickly.  Take a quick 2 or 3% gain and get out.  I would look to buy more things 10 or 15% down from here.  Just depends how violent the moves are down.  I'm very interested in inflation bets.  Buying commodities and selling treasuries.  Commodities will go down as people worry about demand for them if the economy tanks and treasuries will rise as people look for a safe place to put money.  But the long term outlook for this trade looks good which is why I would want to take a position if the market sells it off in the short term.

If I am going to short I'm going to short even more the real estate sector.  I still think commercial real estate is in big trouble. I look around my city and downtown L.A. and there are empty buildings everywhere.  This is going to get worse before it gets better so I don't see any relief for this sector in the near term.

Thursday, June 18, 2009

When You Never Fail ...

You are not taking enough risks.  In a strange coincidence today, I talked about this very subject with three different people.

One of these conversations was with a subordinate.  Or more accurately it was a subordinate of a subordinate.  This worker was frustrated for a number of reasons.  One of which was the belief that this person felt as if he and his team were not performing at a high level.  He made the comment that he had never missed deadlines in the past and yet he and his team had missed several deadlines over the last few months.

Now, I corrected this person.  As the person who decided when and if things go out on time, I have not been unhappy with the performance of this team.  I do not think the team has performed great but they certainly have not failed either.  This person's comment bothered me though.  How is it possible that you have NEVER missed a deadline.  I have not missed very many in my life, it is why I've done very well in my career, but I certainly have missed a few (non-critical) dates in my life.  I pointed out to this person that if he really felt as if he had never failed to deliver in the past, that it simply meant he had not taken enough risks or been aggressive enough in his life.

It would be easy enough for me to always deliver on the things I said I would by simply promising less.  But wouldn't that defeat the point of great achievement?  If great achievement were predictable than it wouldn't be so great.  Great achievement inherently has risks because you are going into uncharted territory.   So I told this employee, that he obviously was not pushing hard enough before and that his performance was probably not as great as he thought.  Unfortunately, I don't think he took the feedback very well.  Maybe that's why we had to have the discussion in the first place.

Tuesday, June 16, 2009

Is the Next Leg Down?

The market had its second triple-digit-down day.  After a 40% up move, the natural question is if the market is headed down from here.

I've been waiting for the market to start a correction for a while now and have thus far been wrong.  So I am hesitant to say that the next moves will be significantly down from here.  I have thought the market ran too far up 10% ago and have been consistently wrong so no reason to listen to me here.  But for me, the market just didn't make any sense where it had gotten to.  We hid the mid 600's at the market low and then bounced back up to 950.  If the market had only come back part of that way, say 800, then I would feel much better about the whole thing.  But oh how we soon forget.  Seems everybody is talking about the economic recovery.  Most of that commentary points to the market running up so much in so short of time.

But oh how people forget.  At the end of last year, we ran up from the November lows to a pretty nice "recovery" in December and January.  No sooner did everybody think the market had recovered did we turn around and hit the March lows.  Not sure we will go back to the March lows, but I definitely think we could see the 700's again and see it very quickly.   If the market opens up lower from here, under 900, I think there is a good chance that this little bear market rally is over and the next leg is down.  That doesn't mean I think you should short everything in sight.  In fact, you might want to take the time to eye a few stocks and start picking out the things you hvae wanted but didn't buy the last time we hit the market lows.

Monday, June 15, 2009

Who Should Pay for the Parade?

There is a big controversy going on in Los Angeles over who should pay for the Lakers' parade.  The estimated cost is $2 million.  The Lakers have already agreed to pay half of the money but there are those who feel that the city of Los Angeles still has no business spending $1 million on a parade when they are laying off so many city workers.

I have a simple and effective solution.  Don't have the parade.  I mean seriously, how important is having a parade anyway?  I'm a huge Laker fan.  It actually hurts me when I watch a game and they lose.  So nobody is happier than I am that the Lakers won a championship.  It has been a very painful seven years for me, the last time the Lakers won a championship.

But in these tough economic times, you have to make choices and you have to prioritize.  However much I would want to celebrate a Lakers victory, is it more important that jobs and a reduction in services?  Probably not.  So why even have one?  Does it make the Lakers any more of a champion?  No.  And given the problems that the police had controlling crowds last night maybe it would be a good thing to not have the parade anyway.  Too many stupid sports fans ruin it for everyone else.  Crowds are dumb, and Los Angeles Laker fans proved it last night.

If the Lakers want to have a parade, than let them foot the whole bill.  If they don't, I wouldn't be mad at them.  It is not like they have a few million dollars just sitting on the side to throw a big party.  Let's figure out what is really important and prioritize correctly.

Sunday, June 14, 2009

Lakers Win Championship

Laker Championship

Tonight, the Lakers won their 15th championship in Los Angeles.  It was Phil Jackson's tenth championship and Kobe Bryant's fourth.   It was his first without Shaq.

I love sports.  I find it a fantastic analogy to life in general. In winning this championship, the Laker's reminded me of a problem I am dealing with at work.  I run a small sized engineering team.  A team that numbers about the same as a professional basketball team.  I have all sorts of people on the team.  Some who are really fantastic, some who are less so.

Kobe Bryant has been the best player in the world for quite a long time but he couldn't win a championship by himself.  He took a team consisting of Kwame Brown at center and Smush Parker at point guard to the NBA playoffs but could not get any further than that.  Not until he got some more talent around him and realized he needed to do more than score did he finally bring the Lakers to a championship.

The lesson here?  You can't do it all by yourself.  More importantly, you can only win as a team.  It does not matter that Kobe is the best player in the world.  You can only win in basketball as a team.  (Unless you are Jerry West who won the Finals MVP even though his team lost).  I'm working on a major project at work right now.  Not everyone on my team is focused on it, but I have asked everyone on my team to roll up their sleeves and do what they can do to make the project a success.    At the end of it all, if this team fails to deliver it will have an effect on everyone else on the team.

Congrats to the Lakers in winning this championship.  Hope to go to the parade if there is indeed one.  There is a debate going on right now if Los Angeles should pay the cost of hosting a Laker Parade when it is in the midst of a budget crisis.  More on that later ...

Wednesday, June 10, 2009

Treasury Sale not Successful - Just the Beginning

Quick lessons on treasuries.  When the government wants to get more money it sells treasury bonds.  The government needs to do this to fund any spending in excess of what it can collect in tax revenue.  It essentially sells future tax revenue to whomever wants to trade it for bonds.

U.S. treasury bonds are bought by all sorts of people.  U.S. citizens buy them but so do foreign countries and their citizens.  The Chinese have bought quite a bit over the last decade or so.  The U.S. is seen as a very safe bet.  This allows the U.S. to borrow money at very low interest rates.  Some of the lowest interest rates in the world.  Like anything else, demand drives prices higher. Since the demand for treasuries has been high for several years, the price of treasuries has rallied higher.

One odd thing about bonds though is that as prices rise, yields drop.  That is, the more people want treasury bonds, the lower the interest rate the U.S. has to pay to people to buy these bonds.  This has allowed the U.S. to borrow money cheaply.   This has been great for the U.S. and has allowed it to finance a debt load in the trillions.

All that is changing and it isn't good for the rest of us.  Today, the treasury auction went badly pushing the ten year treasury to just short of 4%.  Not high by historical standards, but high when you consider that short term treasuries are near 0%.   Why should you be worried?  Think about how debt spirals start.  The U.S. is going to have deficits as far as the eye can see.  The only way to fund this is to sell bonds.  Now the borrowing is getting more expensive.  So you have to issue more bonds to cover expenses.  Well this means more and more of the money is getting diverted to just paying the interest.  How to pay for all the interest?  Issue more bonds.  That creates more supply, lowering prices, and raising interest rates!  Rinse, repeat.

It's like someone with massive credit card debt whose interest rate is rising.  They keep spending and using one car to pay off another.  It is a story that just doesn't end up well.  I have a position in TBT, an ETF that shorts treasuries.   I will look to enlarge that position.

Tuesday, June 9, 2009

Oil Above $70 ...

This can't be good.  Oil has been on a tear from its lows in the mid thirties.  Some would argue that this is a sign that the economy will turn around because people are showing the belief that there will be demand for oil as the economy grows.

But I look at it from the other angle.  I, as a consumer, have a couple of problems.

  • I might have lost my job

  • I probably have huge credit card debt

  • I probably have less credit because a few cards have probably been closed

  • I probably have missed a few mortgage payments

  • My retirement savings have been killed even factoring in this 35% run in the last three months

  • I am paying $3 a gallon for gas

That last one is just adding insult to injury. At least with a bad economy, I might be able to spend less on gas than I was last year. But with oil continuing to be strong with no sign of weakness in sight, I have to wonder how strong the rebound will be in our economy.

That being said, I think the energy names look attractive here.  Most of those stocks have not run up as much as Oil have and they do not have $70 oil priced in.  Names like Exxon Mobile, Conoco Phillips as well as drillers like Schlumberger and Petroleo Brasileiro look attractive to me.  Why worry about rising gas prices?  Might as well just make money off of it.

Monday, June 8, 2009

Time to Buy Ford

Ford LogoI've actually had several different people as me my opinion on Ford.  In each case, the reason to buy was the same, it is the only of the big three that did not need to declare bankruptcy.  Chrysler looks to be having some problems selling its assets to Fiat and GM will probably run into the same issues.  Given these issues and the perceive lack of weakness, is it not a good idea to buy Ford?  For those who want to buy American, won't Ford be the only logical choice?

My answer to each of the people who have asked me is to stay away for Ford.  I'm not saying the logic isn't sound.  There are lots of people who will always want to buy American and Ford should benefit from its relative strength.  However, I never like as an investing thesis that a company is the least weak.  I want companies to be strong.  I want companies who know how to make money in any environment.  And this is clearly not Ford.  While strong compared to GM and Chrysler, it is still weak to Honda, Toyota, Mercedes, etc.  Ford has not shown it can win in a worldwide market and that is the situation it finds itself in.

To make matters worse, I think from an equity position Chrysler and GM will likely be the better buy when the get out of bankruptcy.  Bankruptcy is not always a bad thing.  For many companies it can be a very good thing.  GM and Chrysler will be able to shed most of their legacy cost that have weighed them down for years.  Ford will not have that luxury.  They will continue to be saddled with these legacy cost and risk needing to go into bankruptcy sometime in the future.

So stay away from Ford as a stock trade.  For that matter, avoid their cars too.

Sunday, June 7, 2009

Simple Weddings - So Many Advantages

I went to two weddings recently.  While both were perfectly lovely, they both just reinforced in my head why I am glad I am not having a traditional wedding.

For those who do not know, I am doing a destination wedding.  My fiancee and I are going to go to Italy to get married.  This excludes a lot of people who might otherwise come to our wedding from coming to the wedding since the cost can be prohibitive.  While we would love everyone to come that we invited, we know that in reality, the number of people coming will be quite small.  But this has its own advantages.

The weddings I went to were very traditional weddings in churches.  There was a priest presiding over the wedding and he did most of the talking.  The bride and groom had very little to do during the whole thing other than saying, "I do".  In one of the weddings, even that did not happen because the bride and groom simply had to raise their right hand to affirm that they took their spouse.  The ceremonies lasted about 20-30 minutes each and the total time that involved the bride or groom lasted about 2 minutes.

In most traditional religious ceremonies that I have attended, the wedding is more focused on God than it is the couple.  I fully realize that I do not have the same relationship that others do with God but it always seem strange to me that the majority of the ceremony is focused on this rather general topic than the specific event at hand.

After the ceremonies were over, we did not get to speak to either the bride or groom very much.  This is the natural course of events as pictures must be taken and they have to greet literally hundreds of people.   I normally think of it as family time for the bride and groom, so I always feel uncomfortable taking too much of the married couples' time at any part of the day.

Going to these weddings makes me appreciate what I'm doing in my wedding all the more.  Not only will it be inexpensive for me to do what I'm planning to do but it will be much more personal.  It won't be religious at all, neither I nor my fiancee are religious, and it will be very focused on us.  I plan on writing my own vows and I think this will make it extremely personal for the people there.  Since there will be so few people there, and I know they are only there for the wedding, I plan on spending plenty of time with them.

There are the obvious other reasons why simple weddings are advantageous, the money I will save will be significant.  But I think I'm much more excited about the intimacy of the event more than anything else.  What do you think?  What do you like most about weddings?  What are some of the best weddings you ever went to and what made them so great?

Wednesday, June 3, 2009

More Bing

Promise to not make this a Bing blog but just wanted to write a few more comments on what I thought.  I spent my first full day using Bing and I liked it.  Haven't really missed Google yet, but time will tell.  Some of the features I liked best.

  •  Video and Picture search are very nice.  The interface is much better than Google's.  I like the preview of the Video when you hover over it and I like the lack of clutter when looking for pictures.

  •  Searching for restaurant chains will give you the most useful information right up top with a map of locations to boot.

  •  Searching for sports teams gives you their record, schedule, and recent scores.  It is laid out in a really attractive way

  • Not so sure about the feature on the right of the search which expands to give you more information about the page without having to visit the site.  Nice idea, but the few times I've used it not so good results.

  • The left hand navigation is useful for sure.  I like the suggestions it comes up with for the most part.  Sometimes they aren't useful, but most of the time the topic Bing suggest is pretty relevant.

  • Search history on the left is also good ... I think.  I do search for the same thing often, but not sure how useful it is to see what I just looked for.

I'll keep using it, but I promise this will be the last time I talk about it.

Tuesday, June 2, 2009

Bing Beats Google?

Bing Search Engine

Microsoft released its new search engine Bing.  All I can say is that I'm pleasantly surprised.  I'm trying to use Bing as my default search engine just to try it out and see if Microsoft has finally caught up with Google.

I was writing a different blog than this one, one about sports, and did a search for "UCLA basketball championships" on Google and Bing.  Google returneda wiki page on the NCAA basketball tournament.  Bing returned a page on UCLA championships.  I was looking for the years that UCLA won the NCAA tournament.  To my surprise the bing result is actually better.  I'm also finding the left hand navigation to be more useful than I thought it would be.

So far, I like Bing.  I used Google almost exclusively even when I worked at Microsoft because I just did not find my results on Live Search to be as relevant as I would like.  But if Microsoft can close that gap, I may have to switch my default search engine.

Have you tried Bing yet?  If so, what do you think?

Monday, June 1, 2009

Four Years too Early

GM declared bankruptcy today.  I called the death of the auto industry four years early.

We will see how GM bounces back.  I'm not sure it does very strongly.  If GM can really shed most of its legacy issues, than it might have a chance to actually come back from here.  I think the road is long and hard from there though.  There are some people who still feel pride in buying American cars but I think that is mostly the generation before me and not my generation or the generation that is following me.  Most people my age and younger are do not care where products are made.  They just want high quality products for not much money.

So do I think that four years from now, GM will be profitable and a leader once again?  I doubt it.  Perhaps they can start turning a profit but can they compete with the Hondas, Toyotas, or BMW's of the world?  I just don't see it.