Professor Elam

Digital Outpaces Print

Friday May 21, 2011

Amazon is now selling more digital books than print books.

http://www.marketwatch.com/story/amazon-selling-more-kindle-books-than-printed-ones-2011-05-19

 

Note for readers, most of my time is now spent on the markets blog

http://www.themarketperspective.com

Watch What You Post on Facebook

Sat May 14, 2011

Well as Jeff Foxworthy says, you can't make this stuff up. Did you read about the bank robber who 

bragged on Facebook?  Really, this is an example of IT security, ethics, and just plain stupidity on the part of the robber. The bank did not change the alarm codes after firing this employee. She returned to the bank and disarmed the alarms, but not the cameras, whoops. Then she bragged about having a 'check' on FAcebook, alerting the police who now apparently wisely monitor such things. Then she left the money with a friend who bought two cars with cash, that day, so much for waiting till things cool off. 

And then, well it gets better, click and read.

The robbery was a second class felony. The robber was a first class fool. 

for those interested in movie versions of how things fall apart in crime capers, consider

Asphalt Jungle, classic crime caper directed by John Huston

A Simple Plan, Bill Paxton, Billy Bob Thornton

Before the Devil Knows You are Dead, last film directed by Sidney Lumet

 

Sold ZSL at 21.60

Thursday May 12, 2011

 

I sold my 300 shares of ZSL at 21.60 today. It looks like patterns on most silver stocks are bottoming.

 

We are not initiating any sliver or gold positions yet. Again the markets are in transition, this is not an ideal time to be putting on investment strategies.  It appears that silver and gold stocks are making a short term bottom. As an alert reader notes, ZSL is a 2x stock which means one has twice the money up  using leverage. We made about three points. And frankly the difficulty of providing updates for such trades makes trading difficult, Money can disappear or appear in  an instant with a market move of $3 in SLV.

Skype, Another Look

Wed May 11, 2011

Here is another view on the Skype purchase by MSFT. Yes they paid more but 

they paid much less per user than the last buyer.   It works the same way with a media buy. The big radio station in any town charges more for their ads than the small stations. But on a per listener basis, you are paying less per listener, and getting more listeners. And as this article shows, this is only 50 days of free cash flow for MSFT. This is  a good example of my exhorting the class to read for context. Reading articles like this helps explain what we study in class. 

Now, can they do anything with it?

As the morning marches on, I spotted this article in the WSJ. Again this kind of reading widens your contextual knowledge of accounting, The article notes that MSFT did this with offshore money. This way they did not have to bring the money back to the US and take a huge 30% or more haircut with federal taxes. So that provided another reason to do the deal. 

http://online.wsj.com/article/SB10001424052748703730804576314854222820260.html?mod=ITP_pageone_0

MSFT Buys Skype for $8 Billion

Tuesday May 10, 2011

MSFt buys Skype for $8 Billion

There are several interesting facets of this. 

The last sale on Skype was $2.5 B, Skype indicated it was going to do an IPO, put itself up for sale, and bingo, MSFT buys in at 3x the previous price. 

Observations

MSFT has always bought competition rather than innovate.

MSFT is really lagging, they need a winner so they paid up. 

This is typical top of the market thinking. Market tops see  big mergers and acquisitions, the positive social mood is inclusionary. Yet on the downside, the markets often regret their eagerness

Daimler for Chrysler

Time Warner for AOL

Fed Ex for Kinkos

Oh well, you heard it here first. I would hope MSFT would finally turn SKYPE into a true low cost conferencing tool. 

Reverse Split at Citi

Tuesday May 10, 2011

CITI has reverse split it stock. Now the four dollar stock is a $40 stock, except of course no one made any money. 

CITI never recovered from the 2008 meltdown. Its low price has made for incredible speculation from $3-$5 and back again.  But mutual funds are hesitant to buy shares in single digits, the low price lends penny stock status to them. 

CITI used to really trade for $40, but now 10 for one deflation has left the common stockholders with much less than they originally owned. 

Networking

Friday May 6, 2011

Here is some insight on how Bill Clinton became Governor of Arkansas

http://www.businessinsider.com/bill-clinton-networking-2011-5

 

I called this  previous post, Management in 600 words.  click and read it, it may be the most important thing you read in college! The idea is that everyone has a different idea of what an elephant looks like, and everyone thinks he or she is the center of the universe. Once you understand that you have mastered management!

I have recommended reading How to Win Friends and influence People to students, It is the original self help book written way back in the 1930s but nothing has changed as far as people relationships. 

Business School tuition bubble

Friday May 6, 2011

Check out this observation about expensive business schools

 

http://www.businessinsider.com/why-mba-programs-are-the-next-bubble-2011-5

Commodity Collapse, Dollar Rallies

Friday May 6, 2011

Oil was especially hard hit by Thursday’s follow-on crash, dropping as low as $99.35 during the North American session, its heaviest drop in percentage terms since April 2009. Crude futures continued to decline on Friday and were recently off over 4%.

Marketwatch.com,  May 6, 2011

We have been warning of extended prices in crude oil, stocks, and commodities in general. The market finally took notice this past week. Here is how it all unraveled.

Ben Bernanke, Head of the Federal Reserve, believes the way to avoid another depression is to flood the world with dollars at near zero interest rates. That policy has not improved employment rates which are now stuck in the low double digits. It has fostered what is called ‘the carry trade.’  Hedge funds and other investors can borrow US Dollars at near zero rates. That is a ‘short’ or bet the dollar will decline. Borrowers have been  selling dollars and buying something else. That ‘else’ has consisted of shares in emerging markets like China, Brazil, and India, as well as commodities.  Silver has soared 60% in the past year. Silver hit its previous all time high of $50, gold has gone to new highs. Absent any shortage of crude oil, it returned to triple digit status. Headlines bemoan $4 gasoline in the midst of an economic slowdown.

Predictably the US Dollar plunged. But this past week it bounced off a slightly higher three year low. And so, everyone who had borrowed dollars realized the game was over. Time to cash out and pay back the loans. Remember how Archie Bunker and son-in-law Meathead were continually getting stuck in the same doorway?  That happened to global traders this past week.

Massive sell orders hit silver, gold, and crude oil, not to mention coffee and copper. As those commodities were sold, dollars were ‘bought’ in that the loans were re-paid.

I chose to track Patterson Energy PTEN as an indicator. Sure enough it peaked just over $31.50 last Friday. Yesterday it closed at $28.37, down about 9%. This is a warning for the Andrews Energy Service Economy.  I have continually warned against expanding  business into this price rally. I hope readers have used the increases in revenue to retire debt and prepare for a pullback. Believe me the pullback has begun!  The 200 week moving average price for  crude at $83 is now a realistic target over the next few weeks and moths. We will experience another 2008 style meltdown?

Oil stopped well short of $145 and PTEN did not hit $35. But that is a negative event, a lower high in technical terms. The speculation and its eventual cost has not ended. Australia and China have overheated housing booms. China has built entire ghost cities in Mongolia. The average Chinese worker cannot afford Chinese real estate. Foreclosures in San Antonio, up to now one of the strongest US Cities, have caused property tax collections to decline for the first time in many years. The unwinding of these world wide real estate speculations from Malaysia to Melbourne will cause other markets to fall. There will be less not more demand.

The Road Ahead for the next year or two is deflationary. Prices will fall. Then, about two years from now,  the result of too much money sloshing around the world will be felt. Prices will soar, interest rates will soar.

For the time being long term US Government bonds are the best safe haven. I own TLT and IEF. The US Dollar will soar via investments like UUP. This will go on until deflation has exhausted the belief that real estate can ever rally in price again. Then about late 2012 or early 2013, inflation will finally take hold. This will happen in a vicious manner ala 1979-1980. The recent run-up in silver and oil is a prelude to what will happen. For now, foreclosure and demand for re-payments will dominate the news. 

 

Least Admired Companies

Thursday May 5, 2011

 

 

http://www.huffingtonpost.com/2011/05/03/the-11-most-hated-american-companies_n_856471.html#s272709&title=10_Delta_Airlines

Here is a list you do not want to make. Note the number of 'banks' all of which you and I rescued from their own bad mistakes only to have them pay themselves bonuses