“It deserves emphasis that a 6-1/2 percent unemployment rate and inflation one to two years ahead that is 1/2 percentage point above the Committee’s 2 percent objective are thresholds for possible action, not triggers that will necessarily prompt an immediate increase in the FOMC’s target rate. In practical terms, it means that the Committee does not expect to raise the federal funds rate as long as unemployment remains above 6-1/2 percent and inflation one to two years ahead is projected to be less than 1/2 percentage point above its 2 percent objective. When one of these thresholds is crossed, action is possible but not assured.” Speech Link
It’s that time of year again. Take a look at my top 10 predictions for 2012 for a fun read (Link).
Remember I’m a bigger fan of reacting to important fundamental inflection point news AFTER the fact rather than making decisions from far off in the future predictions. I do however find it useful to crystallize my current leanings and thoughts with this top 10 list. I reserve the right to change my mind at any time as new data-points are released. Here it goes:
1. Amazon will print poor results with decelerating revenue growth and horrible earnings due to greater price competition from Google/Apple/Best Buy/Walmart/Target, higher effective end-user pricing from new states sales tax collection, the secular shift in the media business from physical to digital, and the imploding Kindle business (Shhh, no-one talks about how Kindle hardware units were down around 50% y/y in 2012) as Apple’s iOS and Google’s Android full mobile OS eco-systems dominate tablets and smart-phones. Investors will also realize that the AWS cloud business is a commodity utility with no pricing power. The result of all this is the stock will finally go down a lot.
2. The current $85 billion-a-month QE infinity program by the Federal Reserve will stop by the end of 2013 as even Bernanke realizes the costs/benefits of QE at this stage aren’t worth it.
3. The secular shift from PCs to mobile computing (tablets and smart-phones) will even accelerate from here. ARMH/QCOM/SNDK/GOOG/AAPL/Samsung/Imagination will continue to benefit, while HPQ/DELL/INTC/MSFT/WDC/STX/LXK will continue to hurt.
4. RIMM’s Blackberry 10 launch will fail due to lack of app support just like the Microsoft Surface tablet.
5. Barnes & Noble’s Nook HD hardware business will continue to disappoint along with the Amazon Kindle Fire. Consumers will realize getting a full tablet operating system features/functionality with 16 times more apps, faster processor, and snappier user interface at around the same price with a Google Android tablet or iPad Mini is by far the smarter option.
6. Amazon will launch a Kindle Fire smart-phone and lose hundreds of millions if not billions on it trying to compete with Apple and Google. Good thing they raised the $3 billion in debt recently.
7. Housing will improve. Zillow will benefit by becoming the predominant way house buyers access real estate information with its mobile tablet and smart-phone apps. The company will really hit its stride in the back half of 2013 as its business model shift to focus on B2B instead of consumer display ads bears fruit.
8. J.C. Penney will disappoint and become Borders Group Part 2 for Bill Ackman. The company will need to raise capital by the end of the year. If they can’t raise capital, bankruptcy will occur.
9. Green Mountain Coffee Roasters will miss its 15-20% sales growth target for 2013 as the company stuffed the channel, pulled forward both brewer and K-cup business through massive rebates/discounting in late 2012, and from rising competition on both K-cups (patent expiration) and brewer hardware.
10. The Dallas Cowboys will surprise everyone and make the playoffs next season on its way to the Super Bowl. The defense will be in the top 5 in the NFL led by Sean Lee and a lock-down secondary. Tony Romo will actually come through in the clutch and Dez Bryant will improve and become the best receiver in the league.
-1 or 2 big trades a year
-$20,000 to $2 million 2007 to 2010
-retrain my mind, to identify game-changing things in real life that were having game-changing impacts on public companies
-see something in your life that Wall Street hasn’t picked up on yet, opportunity to make information arbitrage investment
-moment that Wall Street starts talking about that thing you picked up on, exit the investment
-what you notice around you, what people are adapting too
-LGF doubled on Hunger Games in 6 months
-20-40% position size into next trade. "invest with conviction" 1-2 investments a year. "material" "big game-changing event" for whatever reason Wall Street has missed
-8 or 9 investments in 3 years. 1 miss, 7-8 all hits triple digit returns 300-500% returns in short period of time
-no stocks at moment, may wait 8-9 months, all about patience
-continue to live my life, read lots of magazines, go to movies, go to restaurants, observe the world around me, "continue to hone my sense of critical observation"
-"when you see something game-changing if Wall Street hasn’t picked up on it, that’s your opportunity to make a game-changing big trade"
Other Past Chris’ “Game-Changing” Stock Ideas
DECK on Uggs
CROX on Crocs
AAPL on iPhone
TRLG on True Religion Jeans
JCG on Michelle Obama pumping J. Crew clothes
ATVI on Guitar Hero
IMAX on Avatar 3D movie
TGT on Missoni launch
Sources: Bloomberg video, internet sites
Fortune article on John Malone: Link
Malone wants his land to generate at least enough revenue to support itself.
"People say to me, ‘Why don’t you own a bunch of gold because of how you feel about the government?’" says Malone, a libertarian who is not enamored of the federal government’s handling of debt or, really, the federal government as whole. "But I have a really hard time owning assets that aren’t productive."
Malone figures that his cropland will get a 5% operating return as an investment, while his forest investments in New Hampshire and Maine should get closer to a 2% to 3% real return. Ranching, he says, gets close to zero in terms of an operating return. But it does have potential for appreciation, especially in times of inflation.
"In the long view in real dollars," contends Malone, "cropland is probably best, because it’s producing a commodity that is consumed by a world market." One thing Malone likes is that the demand for farm and wood products (and, to a lesser extent, beef from ranching) is independent of domestic fiscal and monetary policies. "You’re not dealing in strictly the local currency," explains Malone, "so you get protection from the fact that the thing your asset produces is desired by a worldwide market. To me it looks like one of the safest places you can invest money is productive land."
"John Malone is as tough in his timber dealings and is as disciplined in his ranch acquisitions as he is in any transactions made on the Street." The 290,000-acre Bell Ranch — about 453 square miles of New Mexico — was originally listed for $110 million in 2006, then dropped to $85 million in 2010, when Malone entered the picture. Malone is believed to have paid between $60 million and $65 million for the ranch. "He’s very open-minded and thoughtful about the process it takes for a seller to sell," says Ron Morris of the Colorado-based Ranch Marketing Associates, who has represented Malone in several large Western land deals. "But John’s not foolish. In my experience with him, there’s no second chance. He’ll make one offer and moves on."
The following is a list of resources you should read before you let anyone you know buy a Kindle Fire HD. The Google Nexus 7 tablet or the Apple iPad Mini coming in October are both far better buys at the same price range.
The Amazon Kindle Fire HD is slower, laggier, buggier, has a fraction of the number of apps (30,000 vs. 500,000), assaults you with ads, and is less functional vs. full tablet computers like the Google Nexus 7 and the Apple iPad Mini.
1) The most important reviewer of tech gadgets, Walt Mossberg of Wall Street Journal reviews Amazon Kindle Fire HD: http://dthin.gs/TIduyJ
"after testing the 7-inch Kindle Fire HD, I can’t agree with the sweeping claim that it is “the best tablet at any price.”
"Fire HD isn’t as polished, fluid or versatile as..iPad..offers..fraction… of 3rd-party apps available on either iPad or Nexus 7"
"after prolonged use..Fire HD showed signs of latency..apps & content displayed delays in launching..disappeared after a reboot"
"Fire HD also assaults users with ads occupying the entire screen every time they start or resume using it"
"Amazon claims..new Fire has advanced Wi-Fi tech..that is faster than the Wi-Fi on the iPad. But in my tests I couldn’t replicate that"
"Amazon’s app store has about 30,000 apps, versus more than 500,000 for the iPad or Nexus"
2) Engadget’s Review of Kindle Fire HD: http://engt.co/TIeD9r
"Chrome browser on the Nexus 7 rendered every page we threw at it faster than the Fire HD, all without relying on any fancy off-site rendering techniques"
"given the prevalence of advertising beating you over the head everywhere you look in this thing"
"we’d still take the Nexus 7. All that content can’t make up for the distinctly limited offerings in Amazon’s Appstore, most notably the first-party Google apps. Gmail and Google Maps alone add significant value to the Nexus 7, and then there’s Amazon’s heavy-handed Android customization. While the Fire HD is far more responsive than the Fire was before it, it doesn’t compare to the feeling of raw, uncompromised (Google Nexus 7 tablet operating system) Jelly Bean"
"for those looking to do more, and do more rapidly, the Nexus 7 is still the king of this diminutive hill”
3) Verge Review of Amazon Kindle Fire HD: http://vrge.co/OF1JUm
"In my testing, I noticed no real difference between the speed of the Wi-Fi on the Fire HD versus that of the new iPad."
"Fire’s more sluggish browser and less intuitive software made the device feel that is was reacting more slowly than the iPad"
"But, it’s also bad in many ways, because it puts a jerky, sluggish barrier between the OS as it was intended, and the OS as Amazon would like to see it work. Furthermore, I’m not entirely convinced that Amazon has such good ideas about functionality and workflow, which makes for some confusing moments when trying to get around."
"general feeling when using the Fire HD was that of a kind of light confusion, a low hum of ‘where am I now?’ Things were never where I expected them to be"
"other big issue I have with Amazon’s OS is that it can sometimes feel sluggish, laggy. The keyboard on the device feels downright delayed when you’re typing on it, pressed buttons sometimes seemed to momentarily stall, and moving in and out of applications could sometimes cause a slight freeze, where the content (or worse, nothing) will just sit onscreen, stuck.
If the iPad and the Nexus 7 feel snappy and "present," the Fire HD seems like it’s out to lunch sometimes. It’s not a deal-breaker, but it does create a sense that there’s a thin layer over everything you’re doing on the device — it means presses are unsure, typing is laborious."
"One other big point worth noting: the Amazon Appstore is simply not up to par with either Google’s Play Store or Apple’s App Store in terms of application offerings. In fact, I found it to be deeply lacking in some key areas, with well known apps like Rdio not even available for download"
Final score 7.5/10 "software can be buggy and sluggish" "app selection is still weak"
Verge gives Amazon Kindle Fire HD 7.5/10 score.
Google Nexus 7 got 8.8/10
Apple iPad got 9.3/10
HP Touchpad 7.5/10, last year’s Kindle Fire 7.5/10
4) New York Times David Pogue’s Amazon Kindle Fire HD Review: http://nyti.ms/UIE60B
Review titled: "More Soot Than Sparks From This Fire"
"Everything lags a bit; some apps take 7 or 8 seconds to open" "gasping processor a couple of seconds to catch up"
"Incidentally, despite the name “HD,” the screen can’t actually show you movies in hi-def. It may have the requisite number of pixels, but most of them are dedicated to black letterbox bars; the screen is the wrong shape for movies. And you can’t enlarge the playback to fill the screen, as you can on an iPad."
5) Reuters: Amazon’s new $199 tablet gets tepid reviews: http://reut.rs/OrcRbV
“Amazon.com Inc’s latest $199 tablet computer got tepid reviews from some closely watched gadget reviewers, a potential hiccup for the world’s largest Internet retailer as it tries to grab a bigger share of one of the hottest technology sectors this holiday season.
David Pogue of The New York Times said the 7-inch Kindle Fire HD has no camera on the back, no GPS navigation, no speech recognition, and trails Apple Inc’s more expensive iPad in thickness, screen size, screen sharpness, Web speed, software polish and application availability.
Walt Mossberg of the Wall Street Journal said the 7-inch Kindle Fire HD is not as "polished, fluid or versatile" as the iPad. After prolonged use, some apps and content took longer to launch and web pages loaded more slowly through the new Wi-Fi technology, compared to the iPad, he added.
Ads "assault" users every time they start the device or resume using it, Mossberg also noted. Amazon said this weekend that customers can turn ads off for $15.
Consumer Reports highlighted the limited apps available for the device, while noting storage is bigger at 16GB but still limited. The tablet ships without a charger, which the magazine called "annoying."
"It may not be for everyone," said Paul Reynolds, electronics editor at Consumer Reports”
6) BusinessInsider’s Kindle Fire HD Review: http://read.bi/SKyWnz
"But not everything in the new OS is smooth. Whenever I navigated to a different section, tried to launch an app, started a video where I left off, or basically did anything to move to a new screen, the system would choke for a beat. At times, the lag would last up to a few seconds, making the overall experience insanely clunky and frustrating.
And the clunkiness gets worse with Silk, Amazon’s mobile web browser for the Fire HD. Amazon boasts that Silk can load pages faster because it stores popular sites on the company’s servers. While that’s true, scrolling around and zooming is extremely slow and jerky, making it nearly impossible to comfortably surf desktop web pages. Even worse: Silk is your only browser option on the Kindle Fire HD. Amazon’s Android Appstore doesn’t offer alternative ones like Chrome, Firefox, or Dolphin."
"The Fire HD shows you full-screen color ads for Amazon products and services (and some third-party ads for stuff like movie trailers) every time you switch the device on."
"But when it comes to getting stuff done: emailing, calendars, maps, and using the best apps as soon as they’re out, the Nexus 7 wins. Amazon designed the Kindle Fire HD to get more content in your hand, not help you do stuff. The Nexus 7 is a much better productivity tool.
And let’s not forget the elephant in the room. Apple has all but confirmed it will launch a 7.85-inch version of the iPad next month, and many think it’ll be within the Kindle Fire HD and Nexus 7′s price range. Apple still makes the best tablet on the market, and you can bet the so-called iPad Mini is going to be good."
7) Ars-Technica “When your best just isn’t good enough: the Kindle Fire HD”: Link
“some operations were even slower to respond than before. It’s not uncommon for the device to take a full second—or two, or three—to act on a button tap when doing something like opening a new application or tab. Silly though that first-world problem sounds, a full second feels like decades when you’re used to other iOS and Android devices reacting within a beat of your instruction.”
“browser on the Kindle Fire HD does work, but it’s one of the apps that takes the longest to open (usually a couple of seconds) and can be a little jumpy as we try to read websites. Page scrolling and zooming are quick, but can be a little choppy.”
”Unfortunately, good isn’t good enough when the Nexus 7 is out there winning hearts and minds without unusual design elements like the carousel or an ever-present row of Things To Buy on the home screen. The Nexus 7 is also faster, has better battery life and a more robust app store, and has access to most of the same content”
“Battery life, while decent, is not as promised. Browser is still slow, despite the ostensibly more mature Silk predictive loading system and MIMO hardware”
“The ads and content everywhere make us cosmically sad; it’s hard to be left alone with your own stuff”
One common thread across all the Amazon Kindle Fire HD reviews is tons of bugs, lag, stutters, and crashes. You really want to be a paying beta-tester?
Over the next 6 months I believe Intel will report numbers worse than market expectations and Nvidia will report numbers better than market expectations.
Intel – Why will it be weak?
1) The company lowered expectations in the first half of 2012 and forecasted the strength in the second half of 2012 would make up for the lowered first half due to the ramp of Windows 8. Windows 8 looks like a certifiable dud after reading dozens of negative reviews and the huge red flag of lowered upgrade pricing vs. Windows 7.
2) The secular unit shift from Intel-CPU based client PCs to ARM-CPU based tablets (iPad, Android tablets) is accelerating, which will hurt Intel’s client PC numbers confirmed by recent Dell and HP PC division performances
Nvidia – Why will it be strong?
1) The Kepler GPU product cycle is the first time in many, many years that Nvidia out-performs the competition (AMD) in the trifecta of graphics performance – faster, more power efficient, and quieter. Nvidia is selling everything they can make with the only limitation being 28nm wafer capacity at TSMC.
2) Tegra 3 is finally getting traction. The Tegra-based $199 Google Nexus 7 tablet and other promised to-be-announced high volume <$200 Android tablets should ramp big volumes in the second half of 2012
3) Looks like Nvidia is back in the good graces of Apple with the MacBook Pro with Retina display design win.
Although I’m a bigger fan of reacting to important fundamental inflection point news AFTER the fact rather than making decisions on far off in the future predictions, I do find it useful to crystallize my current leanings and thoughts. As always I reserve the right to change my mind at any time as new data-points are released. Here it goes:
1. After some volatility in January from macro headlines in Europe, SodaStream stock will sky higher in the first half of 2012 on spectacular quarterly financial results in February and May. The company’s European revenue will surprisingly be stable due to better management of the Nordic distributor acquisition, U.S. sales will continue to impress from the store roll-out, and the Walmart deal will be announced. How the company does in the second half of 2012 is less clear.
2. At some point in the year Green Mountain Coffee growth will slow down markedly as consumers grow weary of the brewer and K-Cup price increases. After the stock falls, Starbucks will acquire the company at a large premium.
3. Netflix net subscriber adds will continue to disappoint as customers flee and Starz video content disappears. The stock will get crushed low enough where Amazon, Microsoft, Google, or Apple (not Facebook, sorry Herb) will buy the company at a large premium.
4. U.S. economic growth will sputter. The Fed will panic once again and do QE3 through large-scale mortgage securities purchases.
5. Gamestop will underperform on the fading video-game console cycle and the lack of blockbuster titles in 2012 vs. the previous two years.
6. SINA Corporation Weibo (Chinese Twitter) user growth will plummet as new real-name government regulations take effect.
7. Social network casual gaming growth will decelerate and Zynga will suffer. The "Curse of JR" will strike again for Electronic Arts as the company acquired social networking and casual gaming companies at "top of the cycle" prices and valuations.
8. Nintendo’s Wii U console and Sony’s Vita portable gaming handheld will both flop hard in the U.S. as casual and mobile gaming continues to shift to tablets, smart-phones, and iPod Touch platforms.
9. Google Places will not gain any traction. Google will wind up acquiring Yelp or TripAdvisor to compensate.
10. The Dallas Cowboys will show just enough flashes of brilliance to get my hopes up, then punch me in the gut by choking and failing miserably in the end. (I had to put one no-brainer on this list)
If you drink a lot of seltzer water, it is a no brainer to buy a SodaStream machine. Not only do you save the environment with less plastic bottles wasted, you also save a ton of money.
Here is how to get the best deal right now on a SodaStream machine. I would avoid the $125 model they have at Costco. It’s not worth the extra cost especially because it uses the bigger CO2 canister, which you can’t exchange at most places.
Stick with the $80 model sold now at most Staples and Target locations. You get the same functionality AND the ability to exchange the 60L CO2 canisters at Staples and Bed Bath & Beyond locations.
Use the “Where to Buy” function on the SodaStream web-site (Link) to find your local Staples and Target locations that have it and also find which Staples and Bed Bath & Beyond locations do the CO2 exchanges.
Although both Staples and Bed Bath & Beyond do the 60L CO2 exchanges for $15, I would recommend doing the exchanges at Bed Bath & Beyond because you can use the $5 coupon they mail out multiple times a year. Just sign up for the coupon mailing list at the store or on the Bed Bath & Beyond web-site.
For $10 per 60 liter CO2 exchange after the $5 coupon, you get an amazing 16.6c per seltzer liter. You also save the environment with no plastic bottles wasted. If you drink soda, you get the added benefit of better nutrition vs. normal brand-name sodas (Link).
So in summary for the best deal deal buy the $80 SodaStream model at Staples or Target and exchange your 60L CO2 canisters at Bed Bath & Beyond customer service desk for $10 after the $5 coupon.
According to the WSJ, the EU is considering a private capital funded SPV (special purpose vehicle) leverage European sovereign debt insurance plan instead of the EFSF funded plan.
“One option would be to create a special purpose vehicle uniquely devoted to insuring investors against losses. The idea would be to draw in private investors and others, like sovereign wealth funds, to create a “bazooka” fund, the person said.” WSJ Link
This is very similar to the Geithner’s PPIP toxic mortgage security plan. The main problem is when we’re in world where every sell-side and buy-side investor is on earnings conference calls with banks and institutional funds telling them to lower European sovereign debt exposure, there is simply NO private capital demand for an SPV like this.
“Under PPIP, announced by Geithner in March 2009, the Treasury and private investors ultimately committed $14.7 billion in equity to funds run by eight money management teams. The Treasury agreed to provide $14.7 billion in low-cost loans to the funds” Bloomberg Link
Geithner promised a trillion dollar+ of bazooka fire-power raised from private capital for his PPIP SPV plan. In the end only $14.7 billion was raised.
-entering very difficult territory
-money managers fully invested because they have no choice due to severe career risk
-main driver of the economy is fiscal policy. It has been extremely stimulative, now turning negative, more restrictive. Europe – more austerity programs USA – early this year net negative. Disappointing economic trends due with that. Fiscal policy can’t become more stimulative onward. U.S., Japan, and Europe economies will disappoint into 2012
-80% of consumers are under-water and “spent out”. End of the month has nothing left. Can’t continue to accumulate debt
-at some point authorities will respond and try to stimulate again due to employment situation, may help stocks, maybe during election year
-another 5 years of a bear market for stocks
-fiat currency system, no discipline anchor, we do not reach low valuation extremes in 1930s. Even in 1970s, 1980s, trading 90% of book value. Book value is SP500 500, still a possibility, but don’t expect it to happen in next 2 years, more the middle of this decade
-next 2-3 years authorities will come with stimulus, SP500 1000-1100 downside, authorities will intervene to provide support, monetary ammunition. Very frustrating years 1000-1500 range in SP500. Lots of mine-fields. 2014-2016 major disaster coming and another wash-out
-defensive positions, trade medium term bull/bear side. no long-term investment policy. risk-free return is below inflation rate
-most of the decline in housing market behind us, but not to previous degree, so deleveraging won’t spiral down as before. Just very choppy, sloppy economy. Inflationary depression
-true consumer price inflation is 5-6%, shrinking economy in real-terms
-there will be more fiscal stimulus, only be able to do it in crisis environment. stock, asset, housing prices have to come down
-long-run not good for bonds, push interest rates up (but swing for 2 years), equities will beat bonds, but hang around in range for 2-3 years 1000-1500 swinging widely, middle of decade will get to close to lows in March 2009
-commodities are a China play. China is slowing down. Anecdotal evidence China is slowing down more than people think. Early next year they may have lee-way to support economy
-Gold is the one currency that reflects all these problems. Authorities will continue to do dumb things. Spiraling debasing of our fiat currency. Emerging market will out-perform as inflation moderates in late or early next year
-QE2 was not necessary and counter-productive to the real economy. Created more inflation and higher prices of food and energy. Ate deeply into average consumer and will slow down economy further. Because of this, we won’t see QE3 quickly, but eventually see it because authorities will get desperate. They are looking for painless solution, but there is none. European austerity will fail and lead to recession
-We’ll see higher taxes for wealthy, cut some entitlements. Lower prosperity to average Western citizen, less spending power/consumption, less investment
-Good currencies: competitive economy, runs structural current account surpluses on continuing basis. Switzerland is a good example. Force out low-value add industries and go up the ladder to higher value-add. That’s how you create winners. Germany, Singapore same thing. Singapore, Norway, Swiss
-We all know Greece, Portugal, Ireland will default. Most likely Spain and possibly even Italy and Belgium will default. Longer they stay in union, most likely default will be, austerity = shrinking economy and rising debt, “cocktail for disaster”, some-one will say we had enough, we are better off if we leave the union. Greece should exit the euro in 1-2 years, devalue by 50%, one more year of problems, then economy will recover and tourism will boom
-Only one solution for the euro. Have to make euro a very weak currency to survive. Dramatically lower euro against the dollar. ECB against this, but will eventually lose the fight. ECB is only central bank trying to reduce balance sheet
-1/2 of U.S. money markets funding the peripheral European banks. Once this funding redeems, it’s over
-Euro will break apart
-New ECB president will hike interest rates in September to prove he’s more German than Italian, but it is completely unsustainable