I had my best developer resign on me this week. It is something that obviously bothers me. You hate to lose your best employees because people of that caliber are so hard to come by.
The one bright spot came today when I went to talk to him to try and convince him to stay. Knowing why he is leaving, I had little hope of trying to get him to stay but I had to at least give it a try. As I started to go into my little spiel he told me to stop because there was little chance I was going to convince him to stay. He told me that the one chance I had was if I told him that I was going to leave the company in a few months and that I would take him wherever I went. He really enjoyed working for me and that it was hard to find a boss that he could respect. He just did not want to work at my company any more.
It is an honor to work with smart people. It is an even bigger honor when these smart people basically tell you that you are a great boss. Makes me that much sadder that he is leaving.
Thursday, August 13, 2009
Tuesday, August 11, 2009
Are We Just Cycling Through Bubbles?
The market had a small sell off today. Nothing to get too worked up about but perhaps the start of something bigger.
But as this market tries to find its equilibrium point, it got me thinking. Are we just going to keep cycling through bubbles? And if so, how badly is it going to end? If we do indeed keep putting off our problems, like all financial mistakes it will just be that much worse when the bill comes due.
Right now, the market has rallied about 50% from its lows. This run-up is in a matter of months. Does that actually sound normal to anybody? The market has gone up this much because the government is pumping out cash like there is no tomorrow. This has already had some effect that should cause people's eyebrows to rise. The rally has been very broad based. And I emphasize the broad part. Some of the worse stocks are doing OK. Stocks of companies that should not exist have actually gone up with the rest of the market. When junk is doing well, you know you have a bubble on your hands.
Just look at the other bubbles that we have had in the last decade. The valuation of some of the dot coms were just ridiculous. Billions in "value" for companies with no revenue. The housing bubble was probably worse. Run down shacks were selling for small fortunes in parts of the country.
Bubbles take longer to form than just a few months, but maybe this one actually has formed faster because we have had the others one that preceded this one. Maybe we aren't even in a bubble and I'm making too much of this. But I just don't see how we can have possibly gone up this much this fast. The future does not look bright from here. Granted, expectations were so low as to be ridiculous before but anyone who thinks that we are going to just bounce off the bottom is just not looking around. There really is not much of an economic recovery happening. People are still losing jobs and companies are still pulling back. Is this really news to get excited over?
But as this market tries to find its equilibrium point, it got me thinking. Are we just going to keep cycling through bubbles? And if so, how badly is it going to end? If we do indeed keep putting off our problems, like all financial mistakes it will just be that much worse when the bill comes due.
Right now, the market has rallied about 50% from its lows. This run-up is in a matter of months. Does that actually sound normal to anybody? The market has gone up this much because the government is pumping out cash like there is no tomorrow. This has already had some effect that should cause people's eyebrows to rise. The rally has been very broad based. And I emphasize the broad part. Some of the worse stocks are doing OK. Stocks of companies that should not exist have actually gone up with the rest of the market. When junk is doing well, you know you have a bubble on your hands.
Just look at the other bubbles that we have had in the last decade. The valuation of some of the dot coms were just ridiculous. Billions in "value" for companies with no revenue. The housing bubble was probably worse. Run down shacks were selling for small fortunes in parts of the country.
Bubbles take longer to form than just a few months, but maybe this one actually has formed faster because we have had the others one that preceded this one. Maybe we aren't even in a bubble and I'm making too much of this. But I just don't see how we can have possibly gone up this much this fast. The future does not look bright from here. Granted, expectations were so low as to be ridiculous before but anyone who thinks that we are going to just bounce off the bottom is just not looking around. There really is not much of an economic recovery happening. People are still losing jobs and companies are still pulling back. Is this really news to get excited over?
Monday, August 10, 2009
Let Experience Be Your Guide
One of my favorite investment books is One Up on Wall Street by Peter Lynch. I like it so much because he explains stock picking in a way that the average person can really understand. One point he brings up is to use your own day-to-day experiences to guide you in your stock picking. Does your kid have a favorite toy that he says all the kids need to have? Does your daughter need that hot pair of jeans from that great new retailer? Stay in a nice hotel that was clean and affordable? Find out if the company is public and buy the stock!
I often use this bit of advice to try and figure out what stocks I want to buy. But today I got just the opposite. I decided not to buy a stock because of my own experience. I had been considering for some time whether or not I wanted to buy Yum Brands. This is the company that holds such companies like KFC and Taco Bell. I'm not a huge fan of these restaurants but I like the space and I like the exposure that Yum Brands has in China.
I do not personally go to any of its restaurants too often but every once in a while I get a craving for a Chalupa. So I went to Taco Bell today, the second time I have gone in the last six months. But for the second time in as many visits, my service was horrible. I had to wait almost 15 minutes from when I ordered my food to when I got it. How is this "fast food". It isn't even slow food. It is food moving at glacial speeds.
Could these be just isolated incidents? Maybe. But it has convinced me not to go back to a Taco Bell and it convinced me not to touch the stock.
I often use this bit of advice to try and figure out what stocks I want to buy. But today I got just the opposite. I decided not to buy a stock because of my own experience. I had been considering for some time whether or not I wanted to buy Yum Brands. This is the company that holds such companies like KFC and Taco Bell. I'm not a huge fan of these restaurants but I like the space and I like the exposure that Yum Brands has in China.
I do not personally go to any of its restaurants too often but every once in a while I get a craving for a Chalupa. So I went to Taco Bell today, the second time I have gone in the last six months. But for the second time in as many visits, my service was horrible. I had to wait almost 15 minutes from when I ordered my food to when I got it. How is this "fast food". It isn't even slow food. It is food moving at glacial speeds.
Could these be just isolated incidents? Maybe. But it has convinced me not to go back to a Taco Bell and it convinced me not to touch the stock.
Thursday, August 6, 2009
Can Fox Get Users to Pay for Content
Fox announced today that it would start to charge users for content on its Internet News sites. Can Fox make this work?
I find this pretty hard to believe. I'm a pretty avid internet user and the thought of paying for content really just does not sit with me. For example. I often visit ESPN and the Wall Street Journal. Both these sites have sections for paid content. Despite the fact that I often go there and I sometimes want to see the stories they have for paid subscribers, I honestly do not feel that compelled to pay for their sites. Why? Because there is so much other content available elsewhere that is often just as good.
In this day and age all I have to do is search on Google and I most likely will find another similar story for free. At worse, I probably will find a blog somewhere that talks about the content of the story. As I tend to be a skimmer of news anyway, that is all I want, so it works out for me.
We have a whole generation of people who cannot even imagine paying for content any more. I am not saying that all content should be free. Far from it. I actually think it might have been better if content was never free. But the genie was let out of the bottle a long time ago and it is going to be pretty hard to put back in.
Somehow Murdoch thinks if he does this, and can make money, it will force all media outlets to do the same, thus eliminating the problem of free content. Yeah, fat chance of that happening. I can pretty much promise you that if this even came close to reality, and it will not, there would be someone who finds a way to get users this content for free. Look at what happens every time the music industry tries to shut down a sharing technology. Another one takes its place.
Does anyone here actually pay for news content?
I find this pretty hard to believe. I'm a pretty avid internet user and the thought of paying for content really just does not sit with me. For example. I often visit ESPN and the Wall Street Journal. Both these sites have sections for paid content. Despite the fact that I often go there and I sometimes want to see the stories they have for paid subscribers, I honestly do not feel that compelled to pay for their sites. Why? Because there is so much other content available elsewhere that is often just as good.
In this day and age all I have to do is search on Google and I most likely will find another similar story for free. At worse, I probably will find a blog somewhere that talks about the content of the story. As I tend to be a skimmer of news anyway, that is all I want, so it works out for me.
We have a whole generation of people who cannot even imagine paying for content any more. I am not saying that all content should be free. Far from it. I actually think it might have been better if content was never free. But the genie was let out of the bottle a long time ago and it is going to be pretty hard to put back in.
Somehow Murdoch thinks if he does this, and can make money, it will force all media outlets to do the same, thus eliminating the problem of free content. Yeah, fat chance of that happening. I can pretty much promise you that if this even came close to reality, and it will not, there would be someone who finds a way to get users this content for free. Look at what happens every time the music industry tries to shut down a sharing technology. Another one takes its place.
Does anyone here actually pay for news content?
Tuesday, August 4, 2009
Get Out the Way
Today, I cut my short positions. This just felt like the wrong thing to do here with the market continuing to rally. I do expect a pullback relatively soon but I have left the money in these shorts far longer than I wanted to. I tried to stay disciplined and say I would get out of the short position when I lost 10%, and I didn't do that. The trade kept falling behind and I kept waiting for the turn that never happened. Rather than continue to lose money, even though I think the market will turn soon, I got out of the trade and cut my losses.
I still have smaller positions in this trade, but it is past the point where I think I can reasonably make more money than I already lost. Had to do it. There comes a point where you have to admit you were wrong and just move on. I don't think the market takes off from here, but I'm also not so sure we can come back down to retest the lows. If you have shorts on at this point, just get out of the way of this market. I know with my luck, this will exactly mark the turn, but I just could not continue to fight the market.
I still have smaller positions in this trade, but it is past the point where I think I can reasonably make more money than I already lost. Had to do it. There comes a point where you have to admit you were wrong and just move on. I don't think the market takes off from here, but I'm also not so sure we can come back down to retest the lows. If you have shorts on at this point, just get out of the way of this market. I know with my luck, this will exactly mark the turn, but I just could not continue to fight the market.
Monday, August 3, 2009
Free Money
The market continued its rally today. This was in no small part to good news coming out of the government's "Cash for Clunkers" program. Most of the pundits out there are calling this a great success since this has risen auto sales month over month. Something that hasn't happened in a long time. But is everything really that great?
In short, no. I think the analysis that states that this marks the bottom of the recession is a little short sighted. The problem with any program like this is that its long term effects are hard to measure and almost impossible to see. While I have no doubt that the program had beneficial effects for the auto industry this month, its longer term effect is not so clear. One problem that a government provided subsidy like this poses is the same problem we have had for the last decade or so. What happens to auto sales six months from now when the money has run out? Will demand still be there for automobiles or will yet another government stimulus be needed? Are we just pushing sales to the near months and the expense of the far months? How many of these sales would have happened without the stimulus? Compounding the problem, we will all pay for this with interest.
What most people do not realize is that this is a simple transfer of wealth from all of us to those who are buying cars now. Government subsidies must eventually be paid for and that money comes from the income tax that we all pay. I know for many people, this seems like a good thing. I mean, it is free money right? Sadly, no. We all pay. Does that mean I think the program is a bad thing? Well the jury is out. Being pro-environment, I'm at least glad some of the cars being traded in are being taken off the road. But as an economic stimulus? Sadly, I think it will fail.
In short, no. I think the analysis that states that this marks the bottom of the recession is a little short sighted. The problem with any program like this is that its long term effects are hard to measure and almost impossible to see. While I have no doubt that the program had beneficial effects for the auto industry this month, its longer term effect is not so clear. One problem that a government provided subsidy like this poses is the same problem we have had for the last decade or so. What happens to auto sales six months from now when the money has run out? Will demand still be there for automobiles or will yet another government stimulus be needed? Are we just pushing sales to the near months and the expense of the far months? How many of these sales would have happened without the stimulus? Compounding the problem, we will all pay for this with interest.
What most people do not realize is that this is a simple transfer of wealth from all of us to those who are buying cars now. Government subsidies must eventually be paid for and that money comes from the income tax that we all pay. I know for many people, this seems like a good thing. I mean, it is free money right? Sadly, no. We all pay. Does that mean I think the program is a bad thing? Well the jury is out. Being pro-environment, I'm at least glad some of the cars being traded in are being taken off the road. But as an economic stimulus? Sadly, I think it will fail.
Sunday, August 2, 2009
When The Market Doesn't Agree With You
I made a bet several weeks ago against the real estate sector. Specifically, I made a bet that we would see continued weakness in the Commercial real estate market. I made this bet because I just looked around my neighborhood and the ones I drive by and I notice numerous empty store fronts without any real chance of all of them being occupied. I actually did not realize how bad it is in certain areas of Southern California since my neighborhood is somewhat insulated from steep residential declines. But if you go into areas where house prices have fallen more, and thus affected consumer spending more, you see a lot more empty buildings. This is going to continue to be a drag on the economy and more importantly on the balance sheet of the those who own commercial real estate.
But right now, the market is just too good. Everything is going up and it is a bad time to be short anything. While my portfolio is up over the last several weeks, it would be even stronger if I wasn't short here and short against the Dow Jones. This does not really bother me since when the market looked weaker, I probably would not have gotten into some of my better positions if I did not short something against them. So net, I have made more money than I have lost.
Is it time to take profits on that position. If they were short term plays, absolutely. The market rally is now right around the level where greed and fear is taking over. There is no more reason to bid this market up yet it keeps going up. Yes, the world is not falling apart. But if you think a recovery is right around the corner, just take a peek there. You will notice that the next street over looks pretty bare.
But right now, the market is just too good. Everything is going up and it is a bad time to be short anything. While my portfolio is up over the last several weeks, it would be even stronger if I wasn't short here and short against the Dow Jones. This does not really bother me since when the market looked weaker, I probably would not have gotten into some of my better positions if I did not short something against them. So net, I have made more money than I have lost.
Is it time to take profits on that position. If they were short term plays, absolutely. The market rally is now right around the level where greed and fear is taking over. There is no more reason to bid this market up yet it keeps going up. Yes, the world is not falling apart. But if you think a recovery is right around the corner, just take a peek there. You will notice that the next street over looks pretty bare.
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