Sometimes You’re The Windshield …
Well, I’ve been true to my word on the investing front. It has been some time since my last posting, and, at that time, I wrote that I planned to wait for the market to regain some measure of sanity, as measured by a VIX below 30. Prior to that, I reassessed my portfolio, insuring I was comfortable holding each regardless of the market’s crisis. Since then, I’ve made no changes and avoided the urge to post. The effect has been to lose just 2 percent of my portofolio’s value — down just under 20 percent at the market’s worst, when the market was down roughly 50 percent. With the market up from its recent lows, I fully expect that we will retest the lows, but it is time to start looking for values again … humbled, certainly, … . So, stay tuned.
Some times you’re the windshield … Sometimes you’re the bug.
Danniyal is witnessing history
This title appeared as the Facebook status of my friend Danniyal — a first generation arrival from Pakistan. In grammar school, he became my son’s best friend, and, through that introduction, our families became exceedingly close. Today, he is a senior in high school, possessing a stratospheric GPA and a mind that amazes and delights the old fart who taught him algebra over a distant summer. During the election campaign, too young to vote, he volunteered for Barack Obama and, as occasionally happens with nacient campaigns, managed several events for the candidate. Today, amidst applications to college, Danniyal is interested in a career in public service, and, seeing his Facebook status, I sent him the following message:
Sears (SHLD) Real Estate Value Update — 1/14/09
Last year, CS estimated the real estate value of SHLD at $4+ billion (4x listed book for these assets). This struck me as unlikely (and I’m long the stock). Besides than the name and credibility of Credit Swisse, there was little to support the assertion in the reporting of that figure by the Wall Street Journal. So, I cut that figure in half and came up with a value of $104 per share (at that time). Since then, the market has tanked, retail has suffered (and continues to do so), and retail real estate is suspect and worsening (a comfort for shorts, a worry for longs, and a problem that increases the uncertainties for both). Well, I just came across a more in-depth analysis of the real estate value that provides the assumptions and valuations at various prices per square foot, and, at $25/sq ft, the $2 billion estimate seems reasonable, even if marginally conservative.
Here is the reference: http://www.manualofideas.com/files/shld_moi_20081223.pdf
Investing and Healthcare — The Quality and Learning Link
A couple of years ago, my colleague Jim Porto at UNC Chapel Hill asked me to teach a two-day seminar on performance psychology, and I loved it. My students, on the other hand, initially evidenced a normal distribution, with agnosticism as the mean. In other words, a small number loved it, a small number hated it, and most figured it was a necessary block to check before moving on to more productive things. As I continued to teach it and my skills presenting the materials became better, the response improved, and, because the materials were taken from research rather than the self-help section at Borders, the impact has been rewarding (and the student evaluations would make my mother proud).
Well, I no longer teach the seminar (having handed it to others who are every bit as capable), but I’ve retained interest in the topic. Over the winter holidays, I read Malcolm Gladwell’s Outliers and Geoff Colvin’s Talent is Overrated. While both are interesting (Colvin’s is better, despite Gladwell’s higher standing on the New York Times Best Seller list), I decided to apply Jacobi and invert – looking at the causes of failure.
Housing Market Projections
Recently, my friend Dave posted a link to as full an analysis of the current housing market as I’ve seen. It isn’t pretty and may require anti-emetics to read. Here is the link:
http://www.designs.valueinvestorinsight.com/bonus/pdf/T2_Housing_Analysis.pdf
S&P 500 Trend Chart
Just a quick note on the S&P500 levels on this first day of 2009. The best fit regression trend line, using the data from 1950 through January 1 of 1995 (before the run up to the high tech bubble) provides a feel for the degree to which the market is over or undervalued.
Clinical Pathways and The Story of O
Newton wrote the Principia (the most influential, non-religious text in human history) in 1684. His three laws of physics and theory of gravitation are contained within it. Almost immediately there was controversy, when Leibnitz published his text creating calculus, and Newton off-handedly claimed he had invented calculus in order to perform his research for the Principia. The issue is not resolved until Newton produced his working papers – with credit ultimately given to both for this monumental advance.
The Google Model of Healthcare Quality and Advertising
The Google model — trading advertising for quality:
http://www.nytimes.com/2008/11/24/business/media/24carr.html?em
The article notes that Google rarely advertises its new functionality, but, having built a better mouse trap, users seek and adopt it — because, by reputation and past exposure, it consistently delivers on three fronts … simplicity, utility, and price … the constituent attributes of its character and persona. With each new addition, a web of use and reliance follows, creating a barrier to exit for the consumer and more strongly establishing customer loyalty.
