October 17, 2008
Good article on recent historical attempts to regulate the swaps/OTC derivatives markets from the Post.
And on another note, Andrew Lahde quits his hedge fund and tells people to regulate their lives:
Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck. Appointments back to back, booked solid for the next three months, they look forward to their two week vacation in January during which they will likely be glued to their Blackberries or other such devices. What is the point? They will all be forgotten in fifty years anyway. Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.
Couldn’t say it better myself.
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Posted by Nelson Yee
September 23, 2008
What an ignominious end to the Nortel saga; talk about the death of a company in slow motion.
Last week, Nortel executives reduced financial guidance for the year, warning that the company would shrink by about 4 per cent. Saying that the status quo was no longer an option for the maker of network equipment, officials said they had begun talking to potential buyers for the metro ethernet networks unit.
The division, one of the fastest-growing portions of the company, makes gear for delivering multimedia content over local broadband networks. It accounted for 13 per cent of Nortel’s $5.38-billion (U.S.) in revenue in the first six months of the year.
You know it’s bad when you’re selling off the future of the company! It’s the inability to think beyond the current situation that causes a lot of problems.
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Posted by Nelson Yee
September 22, 2008
Mutant, one of the very few posters on Metafilter worth reading for in-depth knowledge of the financial and banking industry, has posted another of his detailed collections of links on a theme, this time the expanding markets of hedge funds (perhaps “alternative investors” is more accurate?) He ends with a link to a Financial Times’ article on a more organized take on poker backing, which is something I’ve always found reminded me a lot of investing.
One of the things the article makes clear to me is that poker is perhaps not the best investment at the moment, as by its nature and reputation, it rarely attracts the kind of player that isn’t in some form a gambler (i.e. someone who plays for excitement). Perhaps that will change if this becomes more developed, although I imagine that it would take a lot of the spirit out of the game and is probably antithetical to the reasons most people get into poker. Once you start seeing accredited educational institutions with poker majors, the poker industry would dry up. Or maybe not — the financial trade is bigger than its ever been. All of these changes have come on the back of networks and technology.
One of the more interesting conventions they use in the article, at least in the latter half, is calling the BadBeat poker players “traders”. I find this a little imprecise — one of the main distinctions between poker and finance in my opinion is that there really isn’t a “market” in poker, one where you can take opposite sides of a position.
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Posted by Nelson Yee
August 30, 2008
Interesting article by Joe Nocera (the editor of Smartest Guys in the Room) about Carl Icahn’s reputation as “an activist investor” and his dealings at XO Communications. “Activism” in this case meaning to the benefit of the bulk of shareholders, which I find a somewhat degraded version of the word already.
Guys like Carl Icahn like net operating losses. If they can get their hands on them — which they can if they control 80 percent of the company with the losses — they can apply the losses against their corporate tax bill. So in November 2005, at a time when XO’s stock was around $3 a share, Mr. Icahn proposed the following deal: He would buy the company’s fiber optic assets for $700 million and take the net operating losses as well. The other XO shareholders would be left with the worthless wireless frequency — and they would have to use most of the $700 million to pay off the debt it owed to … Carl Icahn!
Let’s dwell on this for a minute. In his role as board chairman, Mr. Icahn was telling XO’s shareholders that it was in their best interests to sell. And yet, he was also saying that it was in his best interest to buy. It couldn’t really be both. Naturally, Mr. Icahn’s cronies on the board agreed to the deal. R2 Investments, however, reacted by filing a lawsuit, claiming that Mr. Icahn and the board were violating their fiduciary duty to the company’s shareholders.
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Posted by Nelson Yee
August 14, 2008
Solar stocks have been a big sector in the past year or so, although to be honest I have been out of the loop with them as they took off in the wake of rising oil prices and the increased emphasis on alternate forms of energy. That said, I started to take an interest in Timminco in April or May, I believe, when there were reports of a major short seller disputing a lot of the claims of the company. I’m not always quick to listen to the various talking heads that get quoted in media reports, but I’ve found a lot of short sellers do a lot more research about companies — obviously, publicizing their doubts would have helped them in their quest to profit, but there was enough there that I started to wonder myself.
Since then, Timminco appears to be not as pretty as people thought, with the head of the solar silicon division and the guy whose name is on their process patents, Rene Boisvert, claiming that people were overreacting by selling the stock (it dropped about 24% on Tuesday). For me, the best part of the article I linked is the reaction from a Sprott fund manager; Eric Sprott and co. were the biggest proponents of Timminco on its rise from penny stock to 2007’s stock market darling:
Yet even Timminco’s biggest backer, Sprott Asset Management Inc., is now taking some money off the table. At least one portfolio manager at the investment firm, which in May said it owned 17 per cent of Timminco’s stock, is reducing his position.
Fund manager Jean-François Tardif, who oversees three funds housed under the Sprott Opportunities Hedge Fund banner, says Timminco once made up 4 per cent of his portfolio but is now down to just 0.6 per cent after he sold the company’s shares in June and July.
“I sold most of my stuff on the way up and that’s my style,” Mr. Tardif said.
Perhaps something isn’t being conveyed in quotation, but how awesomely nonchalant is that quote? Isn’t this a tacit admission that he thinks the stock isn’t going to go up anymore? I mean, if you really believe in the future of this stock, with its talk of this super effective and cheap method to produce solar silicon from metallurgic-grade silicon, why would you sell off the bulk of your position? I mean, if the forecasts of Timminco are true, it would be worth a great deal more, no? To me, this signals a lack of faith and/or an ability to capitalize on hype.
Anyhow, I will continue to watch this stock and be entertained.
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Posted by Nelson Yee
