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Michael B. Krause's Comments Stream Stats
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Sigma "Massacre" - What To Do?
Commodities Prices: Speculation Exposed
What does that have to do with short term (next 10 years) oil price? Economies also cycle, viruses happen, famines, storms and wars destroy large swaths of populations every once in a while as well.
Such is the evolution of humanity.. Here's some interesting data on China birth rates. Even with one child policy, their birth rate is higher than that in the United States.
afe.easia.columbia.edu...
The Case for $1300/Oz Gold
As long as I've lived, Japan was (and still is) an export economy. The same applies to China with a much larger scale of magnitude. A strong currency will kill their GDP growth.
And then there are crude input costs. If China entirely removed the subsidies on crude (they force their refiners to run at a loss), margins on Chinese businesses would be at further pressure. The stronger currency would help offset this pressure, but at the same time would dramatically reduce demand for their goods from world consumers.
Commodities Prices: Speculation Exposed
Look at the percentage of income spent on food in India and China per capita. The real population driven energy demand drivers can not simply afford *unsubsidized* product in the long run with current CPI/consumption balances taken into consideration.
The whole Chinese and Indian labor/export model (which is the foundation of their rampant growth) does not work if the governments stop picking up the tab.
For examples, look at Indonesia. They just raised the price of gasoline (it is subsidized) to the equivalent of $2.45/gal. At a long run breakeven for refiners of $7-8 on the crack spreads (of $3.33 avg product price at $133 crude +$7 crack), that is still 27% below market clearing price.
And even with that, there are bloody riots.
The Urban consumer in China in 2006 has about $1469 of income annually. How much unsubsidized oil (at $3.33) can he afford with food already consuming probably in excess of 26% of his expenses (imagine these #s with the price increases in commodities/inflation) ?
The Chinese rural peasant (most of the population) has $448 of income. He spends 34% of his income on food in 06 (probably a lot more right now). How much $3.33/gallon product can he afford to be economically competitive in the rest of the world [only justified by his willingness to work for rock bottom labor rates]?
If you are the average Chinese or Indian, this is not the time to buy your first car. Any new buyer is on the margin, a very very slim margin.
www.ers.usda.gov/Data/...
You China+India demand pipe dreamers need to get over it. This is an Olympics diesel stockpiling blowoff top and will not be sustainable in the long run.
As long as Arab oil princes are running AC to 50 degrees F in their 5 million square foot palaces 365 days a year off oil fired power plants, they are quickly sowing the seeds of demand destruction and eventual replacement of energy sources (nuclear, wind, solar, etc).
Time To Abandon Stocks?
All of the evaluation of statistics and precedent will give you false justification for your investment behavior.
Simply put, if the managers of this country do a good job in the next 20 years, stocks will do great. If they goof it all up, you'll lose your money. Its that simple, and thats what you are betting on.
Commodities Prices: Speculation Exposed
Microsoft in Perfect Position to Undercut Previous Yahoo Offer
1) My calculations are based on the assumptions that search market share for MSN (and others: Yahoo, Google, etc) are fairly in line with their revenues. I am making (what some may consider disagreeable) a leap saying that search shares are consistent enough to get a handle on valuation. Is 100% of search worth $150B total? Maybe not search alone: but search, display and everything else that comes with it does come to that. MSN is worth more than search, but so are Yahoo and Google. So for blunt measurements (which are practical for such high multiple stocks), I think its appropriate.
Add up Google, MSN, and Yahoo market caps and you get somewhere close, plus or minus normal volatility (recall GOOG was worth 25% less just a few weeks ago because analysts incorrectly pinned Google's growth curve).
2. I meant revenue when referring to cash flow, not Cash flow on operations.
3. I agree it may not be foolish to merge, but at such a high multiple, all benefits from the merger would be likely forgone with such an overpriced initial transaction. High risk, minimal reward.
Lastly: $47B isn't a merger. Thats a money giveaway.
Microsoft in Perfect Position to Undercut Previous Yahoo Offer
I was a bit sloppy there - I made a causative assumption saying that since their real returns are much weaker (than even 6% earnings yield on such a high multiple that MSFT offered), that the likely result of such a collaboration would at best create normal (somewhere between the 58 multiple MSFT is offering and the best-case multiple of 6) returns for enormously high risk.
Microsoft in Perfect Position to Undercut Previous Yahoo Offer
Take a look at the latest 10-Q. $10.5B total stockholder equity, 2.2B of that being Alibaba.
www.sec.gov/Archives/e...
My estimate of a $30B offer value on Yahoo is nearly a $10B premium on the cash flow valuation estimate, perfectly making up for these 'assets' you mention. Their interest in Alibaba is worth $2.2B according to their own 10-q.
ComScore: The Google Fallout
The comscore data will be useful for macro trends. If click data is down 10% q/q from comscore, I'd trust that as a general guide.
But more than half of revenues are from the international sources, so good points.
That said, $25 for next year gives you a forward PE of 21. Considering that lines up with growth #s of 20%, this is a fairly valued stock. If google gets yahoo's clicks, pop another $5 onto earnings and you have a $600 stock.
That said, I don't think there's much upside beyond that unless they find a way to monetize the developing world more aggressively.
Dear Mr. Bernanke
This is going to be a long a protracted unwind, a recession with some defaults, but this is not a depression.
Options Trader: Wednesday Outlook
The market only cares if there is too much or too little supply, and will adjust price accordingly.
An Energy Policy that Makes Cents (and Sense)
scriabinop23.blogspot....
And on ethanol: scriabinop23.blogspot....
Chance This Is The Bottom? Zero.
scriabinop23.blogspot....
Chance This Is The Bottom? Zero.