Sony’s quest for relevance

I’m a massive fan of Sony despite being an Xbox guy. Legacy innovation and wonderful products aside, its been no secret that Sony’s been in loss making mode since the dawn on the millennium. Reading this article, no wonder they haven’t made any money.

But you never know. Japanese tech companies have regularly bowled googlies (or wrong ‘uns if you’re Australian). Remember how Nintendo was doomed to irrelevance until they tore up the rulebook with the Wii? It takes just one big idea.

Article via Bloomberg

Bitcoin- What’s the deal?

The crypto currency bitcoin has exploded into the news over the past few years. Most famously upon the default of Cyprus and Greece, the value of this would be game changer shot through the roof. I’ve already highlighted how, thanks to the digital revolution, a premium is being tacked onto anything with the potential to disrupt. What’s more disruptive than an entirely new currency then? This could be the very basis of a revolution!

Chasing Bargains in Japanese businesses

Over the past few months I’ve had to come to terms with the fact that finding bargain businesses in traditional shores has become more and more difficult. Now usually, when one bargain hunts, the ratio of genuine bargains to pieces-of-shit is on the lower end of the scale. Of late, this ratio has got out of hand though. There are still bargains but I’m having problems finding good enough one’s to stake anything in. I’m not pretending to be the world’s most competent bargain hunter but given my general outlook on this market, it reinforces my opinion that the American markets and a few international ones are overvalued. So what ‘s a miser to do?

Signs

Interesting that I read this the same day the market made new highs. Asset swaps and equity fueled takeovers suggest equity is getting up there in terms of valuation. The thinking on part of these managements is: Why pay out cash and increase the company’s leverage? Far easier to dilute shareholders and exchange my expensive stock for yours.

Article via Bloomberg

See also this chart from the excellent rank and filed website

M.L.Pee on your returns- Part 2

continues from part 1 here…

Previously, we looked at the balance sheet effects of sponsoring an MLP or REIT. Here we’ll look at how debt can be manipulated by the parent company.

To ensure creditworthiness of the MLP, which it needs in order to issue meaningful debt (which can be funnelled back to the parent), the parent has to guarantee its fiscal performance. This guarantee usually amounts to issuing letters of credit or guaranteeing debt repayment. Most companies of a certain size have revolving credit lines from which they can access debt. Usually the subsidiaries have access to this revolver as well. Now, the bank sponsoring the revolver will need additional criteria to be fulfilled for the newcomer to qualify. These criteria are where debt guarantees come from.

Balance sheet shenanigans or: How I learned to stop worrying and love crooks

Apologies to Kubrick for ruining what was a great title of an even greater movie.

I once ran day to day operations of a small/medium retail business for a man I know and respect. He had been in the retail business for 20 plus years and knew all the tricks of the trade: legal and not so legal ones which, given the business environment we operated in, was necessary. My biggest worry was my staff or customers stealing merchandise. The customers were easy enough to monitor but the staff presented a huge problem since I found it difficult to trust and suspect people at the same time. When I presented him with this problem he sat me down and basically said,”You need to be the bigger crook”.

M.L.Pee on your returns- Part 1

This article caught my eye recently. Its admirable that Fidelity seems to be educating its customers about the various investment vehicles out there. However, the article also seems to be marketing something which is against the very basis of successful investing: follow the crowd. I’m not a huge fan of REITs and their less liquid cross industrial cousins, MLPs. Let me try and breakdown what actually goes on with the formation of such entities. Here’s a quick definition of what a REIT and MLP is.

S&P: When will the last fool stop buying?

Its no secret I’m currently bearish/neutral on the market. An obscene number of valuations stopped making sense as far back as December ’13 and the irrationality has only increased. I’m not a fan of shorting on the basis of fundamental principles since, as Keynes said, “Markets can stay irrational longer than you can stay solvent”. Fundamental reasons always need a catalyst, an indication of peak insanity if you will, for the tide to turn. Its difficult to tell when the last fool has ceased operations.

The Value of Uber

News broke this past Friday that Uber, the car service matching app, has raised $1.4 billion for an implied valuation of $17 billion. The first and understandable reaction was one of disbelief but most of this was a cousin of “the price is too high” sentiment. Just because something is expensive doesn’t make it ridiculous.

Caius Preposterous and market forces

The man. The legend

Caius Preposterous was a Roman economist who lived around 50 B.C. Gaul was entirely occupied by Roman forces except for a tiny village which held out against the might of Rome. The noble exploits of this man are sadly preserved only within that noted historical tome “Obelix and Co.” Charged with bringing the village to its heels Preposterous cleverly concocts an economic plan instead of the usual military strategy. He would flood the village with the corrupting power of money and use greed to crush the little village.