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Michael B. Krause's Comments Stream Stats
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Sigma Earnings Analysis: Shorts Should Soon Have to Cover
I'm not advocating buying a hot potato here. 143% growth is definitely not in the cards, but even a 25% growth rate is realistic going forward. 3-5 years out = perpetuity as far as the stock market pricing mechanism, anyway.
Even a meet at 300M for FY09 is 36% growth y/y. Impose that over a typical curve ... 36 ... 25 ... 20 and you get a multiple somewhere in between, with a price target way above currently trading prices.
SIRF's margins after operating expenses are attrocious. Furthermore, the IPTV business is nascent, in the very early stages. Sure, there's always commoditization pressure of any chip product (and may I dare venture to say that GPS consumption is much more saturated than IPTV or Blu-ray), but surviving semi companies adapt with R&D and innovation. They now have a cash hoarde to be able to adapt.
Blu-ray is another story entirely -- and even a fractional ownership of the market with accelerating adoption a year or two out spells an entirely new source of growth.
Sigma Earnings Analysis: Shorts Should Soon Have to Cover
You don't have to be a rocket scientist to figure out that even a repeat of that year with .24/share of earnings with a 20 PE gives you a 4.80 valuation. But on top of 300M assets reserve, this company now can leverage itself into many directions. Combine the book value with that 4.80 valuation at you have the most ridiculous price target of about $15/share, assuming earnings decline from 240M to 90M.
So why would anyone in their mind be short from $20? You don't need any sophisticated ASP trend analysis to reveal that there's really an unfavorable risk:reward profile for a short position at these prices. Even if the Needham analyst is right, and SIGM's 300-350M guidance for FY09 is unrealistic (due to overall market weakness / demand limitations), even back under FY08 #s still yields an extremely viable business.
The burden of proof now lies with the shorts now -- nothing past a superficial balance sheet and cash flow analysis is necessary to support the long case, simply because this valuation is so absolutely out of whack.
Sigma Earnings Analysis: Shorts Should Soon Have to Cover
Sigma Designs: Too Inexpensive to Overlook
Inflation's Power: The Dollar in 25 Years
They are an indicator ... these prices should give incentive to finally invest in supply. Additionally, they will cramp economic growth.
staflation is an interim step to deflation.
The Long Bond is Falling - Why?
but true global recession will not coincide with price inflation, i guarantee you.
The Long Bond is Falling - Why?
So if you are indeed right, and inflation *for the next 2 years* be at 5%+, then this is also a signal stocks are a buy now (since prices won't drop because economic activity won't reduce from here).
I think this is all a wrong assumption -- when real scary #s of economic slowdown (job losses, systemwide defaults, etc) start hitting, the long treasury bond will fly in both the flight to quality as well as concerns about deflation occur. The long bond has no justification at 4.65% if we are in a long term cyclical credit contraction.
Doesn't anyone remember the 2001 recession when everyone was worried about price deflation? That will justify rates lower.
As far as oil and commodities are concerned, they will all come off when real demand gets hit in a big way. And that takes a real global recession. That hasn't come yet, nor has the fear of one yet hit. Look at countries like Australia that are still raising rates, have lowering jobless rates, etc all on the heels of rampant commodity demand. When countries like Australia and South Africa turn on lower commodity demand, the bond will look great with a 3% yield.
The 'Uptick Rule' (A.K.A The Dangers of Dog Piles)
Love it.
T-Bills vs. Fed Funds: A Recessionary Tale
T-Bills vs. Fed Funds: A Recessionary Tale
T-Bills vs. Fed Funds: A Recessionary Tale
About drop in earnings to the first poster -- its fascinating to look at GAAP versus operating (higher) earnings. My #s are based off of operatiang measures. In actuality, GAAP earnings of 2000-2002 reflected at peak a 49% y/y drop on the S&P. Huge divergence from operating numbers. Just another wrench in the toolbox of analysis. The Shiller #s are GAAP based earnings, while S&P (service) provides both. Take a look www2.standardandpoors....
So Much for the Decoupling...
markit.com/information...
The Treasury Bond Bubble
I too think bond prices (like you say) are a function of a ton of cash seeking a safe, 'politically correct', home --- more than correctly gauging inflation. You could say a function of increasing money supply to address aggregate demand and bank reserve requirement issues (which the fed and other central banks manage/interact with).
The long bond is saying that we are at the end of this round of inflationary spike, if you are to infer any message there. My hunch is that the long bond will start to break current resistance when it sees crude oil plummet. Crude oil will guide most of the entire commodity complex (ags and most energy at least), since so much of the world foodstock issues are dictated and correlated by crude demand [oversimplification: corn is overplanted due to ethanol subsidies, wheat and soy complex becomes underplanted, etc etc].
Don't Buy (Sell) The Bear
Here is a response I made on my blog to Reinko:
But whats happening here is a transfer of wealth from mismanaged corporate balance sheets and investors (holders of subprime bonds) to borrowers (many of whom will file bankruptcy). Running up consumer debt, the borrow still gets to enjoy the benefits of the purchasing power he was given, at the expense of the foolish lender.
The fed & US govt knows this, and knows the only solution is to devalue the dollar and inflate future earnings quantities to prevent an excessive slowdown and bankruptcy level. This excessive level of debt (ie 30T) however needs to be compared to cash and equity reserves (401Ks, pensions, cash savings, money markets, total home equity base properly discounted to correction in correspondence with total money supply and inflation, etc.) to have a fair evaluation. If the money supply doubled the past 10 years, then its less meaningful a number. The ratio of debt to money supply is more important.
The fed knows all this and will continue its current policy at the expense of the dollar. This is a weakness of all fiat currencies though, and since this is true, a global economic contraction on the same scale in Europe will hurt the euro just as much. It'll become a question of who hurts more.
Arguing that we're screwed because total debts have doubled in 10 years sounds wonderful to the bear, but it does not present a true picture when considering cash reserves and total money supply has increased as well.
So further conclusions: the dollar will ultimately suffer at the expense of the S&P and housing boom. That is, unless other country recessions follow (which is likely, considering the housing price boom is not something unique to the US).
And if any of you are truly this bearish on equities, I recommend you have a look at this
scriabinop23.blogspot....
and this:
scriabinop23.blogspot....
Why Technical Analysis is Nonsense