Thursday, June 30, 2005

Fun With Markov Chains

For the ultra-geek I present you this... Its fascinating to me - I guess I am ultra-geek by my own definition. Fascinating, I say, fascinating!!

Fun With Markov Chains

Wednesday, June 29, 2005

CME

Whew, what a run! And the power of rumors!!

Merc Soars on buyout rumors

Monday, June 27, 2005

The Perfect Vision of Dr. V.

Beautiful Article on Dr. V, the catarct surgeon from India. This is a slightly older article. But recently he was discovered by a San Francisco businessman and investor named David Greene. David learned that Dr. V used his profits from cataract surgeries to fund the charitable surgeries that he did for free. They also discussed his business model and found that he spent about 600$ for each pair of artificial lenses he installs on his patients. David Greene then setup a manufacturing plant, which manufactures and sells these lenses to Dr. V for a little over 4$ and still makes a profit. This means that Dr. V now can put in $596/- more of profit towards charities. He has done well over a quarter million free cataract surgeries and restored eyesight for the poor in Southern India. Just simply beautiful.


Excerpt:

He's an eye surgeon -- a man of vision. He has learned how to deliver perfection, and to do it despite crippling obstacles. As a young man, a brand-new obstetrician, he contracted rheumatoid arthritis and watched helplessly as his fingers slowly twisted, fused, and grew useless for delivering babies. So he started over, this time studying ophthalmology. He managed to design his own instruments to suit his hands, and these tools enabled him to do as many as 100 surgeries a day. He became the most admired cataract surgeon in India.

Twenty-five years later, he confronted another potentially crippling obstacle: retirement. In 1976, facing the prospect of social shelving at age 57, he opened a 12-bed eye hospital in his brother's home in Madurai, India. Today, he runs five hospitals that perform more than 180,000 operations each year. Seventy percent of his patients are charity cases; the remaining 30% seek him out and pay for his services because the quality of his work is world-class. He is a doctor to the eyes and a leader to the soul.


Link:

The Perfect Vision of Dr. V.

The World is Flat - Tom Friedman

This is in the same vein as the link posted by Rajesh.

Heard Tom Friedman in an interview on Science Friday. His new book seems promising. For those of you who need a reminder he's the guy who did a series of articles in the NYT (he is foreign affairs correspondent for the Times) on India's IT boom last year. The book titled "The World is Flat" explores how with globalization we are all becoming more and more co-dependent - the developed world needs the third world just as much as the third world needs the developed world.

Quotes from the interview:

"If you had a choice to be born a genius in China or a B grade student in Bethesda, Maryland 30 years ago, you would have been better off being the BV grade student in Maryland. But if you had that choice today, you'd better hope you're a lot better than a B student in the US. A B student in China in fact would be a lot better than a B+ or A- in the US today."

"We cannot afford to be dumb, fat and lazy in the globalized world" (about America)

Sunday, June 26, 2005

India: How To Divvy Up A $22.5 Billion Empire

The story of Reliance Industries and the Ambani Brothers ...
India: How To Divvy Up A $22.5 Billion Empire

Saturday, June 25, 2005

The world economy in 2025

Globalisation: The world economy in the year 2025

India - the growth champion
With a population of 1.4 billion, India will be home to as many people as China in 2025. It will be among the star performers of the next twenty years. GDP growth of 5.5% p.a. will make India the third largest economy, even overtaking Japan. The reason: the opening of markets and society will proceed quickly. Irrespective of its poor infrastructure, India will make its way to the top via the internet. This will be aided by the population's traditionally good understanding of mathematics and good command of English, the latter stemming from the country's colonial past. Well-trained Indians will work as services specialists in a global IT network and provide stiff competition for European and American software developers. Nonetheless, per-capita income (at USD 6,000) will remain at the lower end of the scale.

Thursday, June 23, 2005

HDFC Bank (HDB)

Responding to Rajesh's question in the email, I did some latest research on HDB and it seems to be in good standing on Validea Guru list. The Buffet screen never really applied properly to it, but two screens I like Martin Zweig and Peter Lynch both give it high marks. Also, William O Neil's screen gives it 100% suggesting this stock has very strong upward momentum. I still recommend we should buy it. It will make a good International + Currency Play.

http://www.validea.com/stocks/guruanalysis.asp?ticker=hdb

Pankaj

Motley Fool Hidden Gems

Your July Issue Is Here!

By The Hidden Gems Team


Dear Fellow Hidden Gems Member,
Your July issue is now available! Visit our website at www.hiddengems.fool.com (login required).
This Month's ThemeThis month, we explore the themes of families in business and investing. Our lesson focuses you on how to get your entire family involved in a lifetime of profitable investing. And our formal recommendations this month are two public companies whose families have owned and run them for more than 50 years. Family-run public companies -- such as Wal-Mart, Standard Oil, Johnson & Johnson, Gap, and The Washington Post Co. -- have made for some of the greatest common-stock investments in American history.
Breaking News!In breaking news yesterday, the CEO and proposed board of directors of Hidden Gems recommendation Flamel Technologies were ousted, with 88% of the votes going against them. That's a landslide proxy vote of historic proportions, which aligns with our voting advice to you last month in Flamel's CEO Must Go. The new board of directors has installed Stephen Willard as CEO. Willard had been Flamel's CFO and general counsel. Could this be a repeat of Transkaryotic Therapies, where former general counsel Michael Astrue took over for ousted management and led the company to glory?

Enjoy your issue and we'll see you in the community!

The Hidden Gems Team

China is flexing its economic muscles

The way of the dragon . This deal may not go through but its a sign of things to come.

Marvel No More?

Barron's Online - Bullish on India

Short, but Interesting...
Barron's Online - Bullish on India

Tuesday, June 21, 2005

Bloomberg.com: Research

Warren Buffett, CEO of Berkshire Hathaway, will dine with the highest bidder for the Warren Buffett Lunch to be listed on eBay, The World's Online Marketplace(R). Bidding starts June 23, 2005 at 7:00 p.m. PDT and runs through June 30, 2005 at 7:00 p.m. PDT.

Bloomberg.com: Research

CBOE - Weekly Strategy Discussion

One more of this strategies...

CBOE - Weekly Strategy Discussion

Monday, June 20, 2005

A conviction worth more than 300 million

Buffet is sticking to his conviction that the dollar is weakening. Berkshire has lost over 300 million in its bets against the dollar so far this year (thats just about 2 quarters), but the Oracle of Omaha is standing his ground. Read the story and read between the lines if you can.

Saturday, June 18, 2005

Google's Value? Search Me!

Yet another article in Barron's about valuations of Google. I do not consciously seek out articles regarding GOOG, but it just brings into mind the frenzy this stock can generate for premier publications like Barron's and WSJ to keep churning out models and articles on this company. Thought you guys might enjoy it.

Barron's Online - Google's Value? Search Me!

Google to Offer Payment Service To Compete With eBay's PayPal

Folks, this could be a major detriment for eBay (23% of revenues through PayPal in 2004) - and diversifies GOOG into another online market stream.

WSJ.com - Google to Offer Payment Service To Compete With eBay's PayPal

Thursday, June 16, 2005

MWD analyst worries about "oil collapse" - soon

CNN Money is running this news story in which a Morgan Stanley analyst is worried about an oil collapse coming sooner than most expect. It runs 180 degrees opposite to many oil analysts who have been predicting $105/ barrel oil prices as recently as 2 months ago. Here's an excerpt:

World oil prices are in a "final frenzy" ahead of a possible collapse soon, with the likely trigger a sharp drop in China's crude imports, according to noted China-watcher and economist Andy Xie.

An important under current to this story is the reminder that Goldman Sachs (GS), which is a major competitor of Morgan (MWD) has made significant and highly risky bets in the oil sector, which are contrary to Andy Xie's assertion. Such an assertion from a noted China specialist from Morgan could bring forth questions about the risks that Goldman has taken. Is it an subtle attempt to undermine Goldmans positions and hence affect its stock negatively? Or is this truly a concern? A fairly good argument can be made for the prior, a cheaper Goldman stock could directly affect an acquisition attempt (by Goldman of Morgan) if there was significant stock involved to finance the purchase. Already, the bells are ringing of Morgan becoming a takeover target faster and faster. Also, a pretty good argument could be made against the latter (that this news of concern). If this news is of grave concern, why are no other oil analysts or Asia analysts talking about it?

Also, reading the news story carefully will reveal that Xie is basically suggesting a combination of factors: 1) Rising dollar, 2) Slowing Chinese Economy, 3) Improvements in energy use efficiency in China, 4) Smaller than expected oil demand in US and 5) Faster than expected cooling off of US economy to support his theory. Many of these factors can be argued for and against using recent numbers.

But any way you look at it, this is an alarming news story. One may be well advised to follow it closely.

Market Statistics 06/15/2005

The VIX shows a lot of complacency. I don't like the look of the Put/Call ratios either. Oil is up above 56 bux a barrel - maybe it is time to take some off the table and go short?

Total Put/Call Ratio : 0.79
Index Put/Call Ratio : 0.86
Equity Put/Call Ratio: 0.73

BXM : 694.91

VIX OPENING VALUE: 11.24
VIX HIGH VALUE : 11.36
VIX LOW VALUE : 11.04
VIX CLOSING VALUE: 11.15

Mark Cuban Breaks Rules [Fool.com: Commentary] June 16, 2005

Mark Cuban interviewed on MotleyFool. Good Read, but the bastards cut the interview off and ask for a subscription to Motley Fool Rule Breakers. I will try to find a transcript somewhere else if anyone's interested.


Mark Cuban Breaks Rules [Fool.com: Commentary] June 16, 2005

Toll Brothers' High Rise Built to Last

Interesting article on TOLL Brothers. I wonder if this John Reese is the same one as the Validea guy!
Toll Brothers' High Rise Built to Last

George Coztanza really exists..

Remember that balding guy with glasses and a yankees baseball hat on his head? Well he's for real - and he has a blog! Read Coztanza's Commentary.

Wednesday, June 15, 2005

Yahoo! Finance - All Business - Morgan Stanley's Future

Spotlight on Morgan Stanley on Yahoo Finance.

Yahoo! Finance - All Business - Morgan Stanley's Future

Tuesday, June 14, 2005

Going long on OEX - options strategy

Going lon on OEX. Thisone is interesting.
CBOE - Weekly Strategy Discussion

Can Google's stock gains go on?

Well, why not throw one more opinion into the mix :-)
Can Google's stock gains go on?

Monday, June 13, 2005

To GOOG or Not to GOOF

Quite fascinating array of products http://labs.google.com/

unthinkable ratios but unbelievable products too. I am tempted, tantalized and tortured.

Interest Only loans vex Greenspan.. What you can learn

The link below goes to an article that discusses Interest Only (IO) loans and gives a list of a major metro cities with percentages of IO loans. It's an interesting study and maybe we can learn something about the housing market "bubble" from it.

Naturally, IO financing is not the smartest or wisest form of financing. In a housing market bubbling as fast as this, and in the face of warnings and cautions of a bubble bursting, it is in fact unbeleivable. Leaving people's financing choices and prudence aside, if we look behind the numbers, there may be a different story to tell.

According to the Joint Center for Housing Studies of Harvard University's study on The State of the Nation's Housing 2005, the housing price increases do not appear to be speculative in nature. Under 6 % of houses in the most aggresively rising markets were purchased as second homes. According to the study, most households make a house purchase decision despite the fact that renting a similar house can be 30% cheaper in the hottest markets. This indicates, according to the study, that the average home buyer is not being speculative in the classic sense but simply optimistic based on current increases. Also, a very small percentage of homeowners are actually turning over the homes for a quick profit (although that number did rise by 1 % in 2005). This again indicates that it is not speculative. They attribute the housing price increases to restrictive land use and building policies by city councils in townships and counties surrounding burgeoning metro areas. This artificially creates a scarcity of land and thus raises existing home prices in the face of increasing true demand.

To distill something of importance from these two reports, it seems to me that one thing is striking. If housing demand is true, and short term interest rates are rising (thanks to the Fed), then the impending bust that everyone is talking about, will disproportionately affect those markets where there is a large number of unwise borrowers who are not taking into account the possibilty of defaulting when the interest rates rise on their Short Term Interest Only loans (ARMs and such). Thus, if there is a bust, it will most likely affect markets at the top of this list of IO mortgages. If you are looking to buy a home in one of these areas, it would serve to wait for a year or 2 or even 3 to let those homes come back on the market for lesser than they were bought, unwisely. As a corollary, if this were a correct hypothesis, then then so-called housing market "bust" will really be a controlled "deflation" largely localized in such IO islands across the nation and may as well serve to be a "boon" to the economy.

MSN Money - BusinessWeek Business News: The Home Loans Vexing Greenspan

Get in the Game..

Jim Cramer is buying shares of GME, following the announcement Thu of its merger approval with ELBO and ahead of XBox 2 Release.

Getting Further Into the GameStop

Morgan Stanley

Phil Purcell plans to retire as the CEO of Morgan Stanley soon. As the crisis is by no means over (they lost a bunch of great employees with great records over the past 3 months and they dont have a new CEO in line - they hired Thomas Neff as the headhunter to fill the post), I have heard an analyst (Richard Bover) from Punk Zeigel bring up an interesting point - He says that over the past few years (say, last 10) there is a marked outflow of investors and companies wanting to do investment banking with commercial banks than the traditional Brokerage houses like Lehman, Goldman etc. He goes on to speculate that MWD might be in such a state which makes it ideal for a takeover given the amount of beating the stock has taken (he states the name of Bank of America in his opinion).

I tend to agree with him as it would be really hard for MWD to make up for all the talent they lost in the past few months, and in this cut-throat world of Leveraged Buyouts,there is a good chance that it might be bought out.

It would be interesting to see what would transpire.

Morgan Stanley's Purcell to Step Down as CEO

Saturday, June 11, 2005

Freakonomics...

Finished the book today. Basically, I did something that I have never ever done in my life, ever. I started and finished the book page to page, start to end, cover t0 cover, prologue, epilogue, acknowledgements, preface, praise for the book, autho bio everything, every printed word in the same day. Non-Stop. Thats how un-put-downnable the book was for me.

It does strike to me that if you liked Freakonomics, the book, then it is likely that you might also like Circles: Fifty round trips through history by James Burke. Like Levitt, Burke also has a forensic mind when investigating connections between seemingly unrelated events and is an astute student of causality. In fact, Burke has more than one titles that explore such "freak" connections within technology and sociology much the same way as Levitt does in economics and sociology in Freakonomics.

More on google

Here is another wsj article on google.
Its very tempting to buy put options. But for us that'll mean speculation rather than hedging. Moreover the options are not cheap either.

Chesapeake Energy - A possible buy out candidate?

Something is brewing with Chesapeake Energy (CHK) here. I have not seen insiders load up so quickly on any stock. While this is always a good sign (I personally never lost more than 4-5% (if I did)when I bought stocks when the insiders were loading up (CCBD is an example).
Look at the SEC filings and check for yourself. The form4oracle.com is an incredible site indeed.
Is it possible to do a tandem play with both CHK and SWN? Is the risk high enough to qualify as a double down?

Insider transactions for CHK

Friday, June 10, 2005

Strategy Lab Summary

Global Investor Vivian Lewis leads. The short positions of amateur Nick Sanders are interesting.
Strategy Lab Summary

Wednesday, June 08, 2005

Econbrowser: Predicting the Fed's next move

Fed-watching at its best. What brought home the bacon for me was that you can actually predict an interest rate hike by watching the Fed Funds Future put option price.

Econbrowser: Predicting the Fed's next move

Search Company Valuations

A nice post with some numbers - throws some light how the internet search companies like Yahoo!, Google, Ask Jeeves, FindWhat etc generate their revenues. It is in a PDF format. KPI stands for Keyword Price Index.
KPI May 2005 Information

Nasdaq Bull Spread

Another one of the strategies.
Nasdaq Bull Spread

Tuesday, June 07, 2005

Is GOOG overpriced at $300?

Is google overpriced?
The same article appeared in WSJ today. This one has a link to a free valuation calculator. The values are calculated based on analyst estimates of growth and p/e. I tried ebay and it came up $31 as the fair value. For UFCS the calculated value is $74. Good news is that most of the stocks we own have higher estimated value than they are trading at. Value of PNRA though was around $49...do any of think that its getting overpriced?

KWR International Special Report March 2005

Emerging Markets - Is This as Good as it gets?

Excerpt:
At some point, the Emerging Markets party will come to end, but probably not in 2005. As long as international economic growth remains moderate, interest rates go up at a measured pace and investors remain hungry for yield, Emerging Markets are likely to enjoy further spread tightening and ratings upgrades. Emerging markets equities will still attract foreign investors. Commodity prices are not expected to fall radically in 2005 and are expected to moderate downwards in 2006. Certainly a crash in the Chinese economy, a massive dislocation in the dollar, or a major geo-political crisis could bring the party to an abrupt end. However, at this point, we see none of that. Consequently, Emerging Markets look attractive in the short-term, but in the long-term we will see a big difference between those countries that have stepped up and made real structural changes and those that talk about it, but have instead enjoyed the cyclical up-tick in the global economy without thinking ahead to the next round. As always, selection of the right securities is critical.

Link:
KWR
International Special Report March 2005

Bill Cara: Cara Investment Reports: Chinese Yuan Revaluation

Bill Cara has a contrary viewpoint to most western officials on the revaluation of Chinese Yuan. He makes some very valid "big picture" points.

Bill Cara: Cara Investment Reports: Chinese Yuan Revaluation

Monday, June 06, 2005

conundrum

canadian discount broker - copying Quaestors name

While I have secretly sighed about the complexity of our club name :), it gives me great pleasure to discover and share that the Questors name is being mimic'ed by this Canadian discount broker. After all, it is something to be flattered about, all thanks to Gadda the Greek.

Questrade

Put Selling strategy

Since Rajesh came up with a naked put sell in his strategy for EBAY, I figured it might be a good time educate ourselves on when selling a put in the naked (yes u can be in your boxers if u wish - electronic trading actually makes it possible to do some really naked trades) may be a good idea, and what the pitfalls and opportunities are. Note that I pointed out in my comment to Rajesh's post on Ebay, that in his case, Put selling combined with call buying will not achieve hedging effect that he desired.


Put Selling Strategy - Traders corner, Schaefers market research

Not every firm goes bananas with splits

Interesting article in the Chicago Tribune on how companies decide (or not) to split their stock.
Not every firm goes bananas with splits

Saturday, June 04, 2005

EBAY

This Barron's article is very positive on ebay. It does a good job of arguing that recent fall in prices may not be justified.

Earlier Gadda suggested that EBAY maybe a good candidate for using options. After thinking about it for couple of months and reading several nice CBOE articles on options I agree with Gadda.

Here is the options strategy that may work for EBAY as an alternative to buying its shares: Buy a call option at the strike price of $37.50 ending in Jan'06 with a cost of $510 (based on yahoo) and sell a put option at $37.50 with an approx price of $580 expiring in Jan'2007. With this transaction we will make $70 enough to pay for brokerage fees. The main reason for choosing this strategy is that, I believe, we're bullish on EBAY in the long term. In short term it still has to prove that it can sustain growth at the current rate to justify high valuations. This way we're protecting outselves from the any downside it may have in the short term.

Why Buffett is buying utilities

Interesting article from Jubak's Journal on MSN Moneycentral.
Why Buffett is buying utilities

Friday, June 03, 2005

Energy SPDR (XLE) -- An energy ETF

For anyone playing the energy sector on their individual portfolios. The talk on hedging the exposure to XLE is interesting. Enjoy!
Energy SPDR (XLE) -- An energy ETF

Thursday, June 02, 2005

Fortune.com - Breakout Companies 2005

Interesting Article on INFY

Give it a read if you get a chance. Really interesting.
India Tech Bulls Snap Up Infosys ADRs

Wednesday, June 01, 2005

The VoIP race is on...

More evidence that VoIP is here to stay and catching on fast as the choice for Telephone service. Om Malik's blog gives some numbers to underscore the point.

http://gigaom.com/2005/05/31/the-us-voip-race-is-on/

HIgh Delta Bull Spread Strategy

Weekly strategy stuff...
High delta bull spread strategy