Thursday, November 10, 2016

Leonard Cohen R.I.P.

We are living in a Leonard Cohen afterworld.
Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That's how it goes
Everybody knows
-- Leonard Cohen, Everybody Knows
I'm sentimental, if you know what I mean
I love the country but I can't stand the scene.
And I'm neither left or right
I'm just staying home tonight,
getting lost in that hopeless little screen.
But I'm stubborn as those garbage bags
that Time cannot decay,
I'm junk but I'm still holding up
this little wild bouquet:
Democracy is coming to the U.S.A.
-- Leonard Cohen, Democracy

Thursday, October 27, 2016

Twitter Fritter v.11

The losses at Twitter have stabilized at around $100 million per quarter. 3Q2016 showed a net profit of -$102 million. Twitter likes to focus on non-GAAP numbers like eyeballs/tweet, impressions/stock option, and so forth. There was great excitement last quarter as tech heavy hitters sniffed around and acquisition rumors were rampant. Alas, they all found the nearest exit when they found the building was on fire. With no white knight, Twitter says they are going to layoff 9% of their work force. 3.64 million new shares of stock were issued this quarter to keep the company running.


Updated fundamentals:
1/8/2013 - twitter IPO stock price $41.65
1/3/2014 - twitter high stock price $69.00
1/13/2016 - twitter closing stock price $18.69, 682.95 million shares outstanding
5/11/2016 - twitter closing stock price $14.59, 694.85 million shares outstanding
7/28/2016 - twitter closing stock price $16.31, 696.57 million shares outstanding
10/27/2016 - twitter closing stock price $17.40, 700.21 million shares outstanding

Twitter stock price change from IPO price: -58%

Dividend: zilch
EPS: -0.60

Monday, October 24, 2016

Bloomberg on Twitter

Everyone is kicking Twitter while they are down, including Bloomberg. Twitter is planning an 8% layoff, perhaps as soon as this week.

The facts are stated, well, matter of factly (emphasis mine)...
Twitter, which loses money, is trying to control spending as sales growth slows.
Twitter, which loses money. Since it started. Every. Single. Quarter...Ever.
Twitter’s losses and 40 percent fall in its share price the past 12 months have made it more difficult for the company to pay its engineers with stock.
The whole scheme has been very dot com version 1.0, selling worthless stock on the basis of "eyeballs". It has worked for a long time, but if it stops working, the cash flow dries up and everything implodes. Brace for impact.

Bronte Capital on Twitter

It seems that great minds think alike. Well, at least there is some consensus on Twitter. Check out this blog post from Bronte Capital.

One of the money quotes:
I received a lot of anecdotes and wild parties and profligate spending, and the plural of anecdote is data - but few things are as convincing as the raw numbers. The conclusion is inescapable. Jack Dorsey - the Twitter CEO - should be fired.
And another:
PS. Twitter staff - I am not exaggerating. Look at the young man on your left and the young woman on your right. Only one of you three will keep your job. Don't worry. It should be worse in the C-Suite. Prepare resumes.
In the spirit of Halloween, it seems all the potential buyers have poked that zombie with a stick and their finance guys got a whiff of the rotting corpse and said "nope". I am looking forward to the next quarterly report.

Monday, September 26, 2016

Conventional Unwisdom

On a lark, I signed up for a presentation by our deferred compensation plan sponsor on "Basic Investing Skills". I'll keep the names anonymous to protect the guilty. The woman presenting the seminar was speaking to a cross section of municipal employees from street maintenance workers, to policemen, to office workers. Her presentation began by describing three kinds of investments:

  • cash equivalents
  • bonds
  • stocks
Although she said she could not provide investment advice, she stated the following as facts:

  • cash equivalents provide no interest, don't bother
  • bonds are bad investments because interest rates WILL be going up any time now
  • stocks are the best investment and provide the highest returns, although with higher risk
She defined higher risk as the "price fluctuates more". She broke the stock category down into large cap, mid cap, small cap, and international with higher returns and higher risk down the scale. She provided Starbucks as an example of a mid cap stock back in the 1990s that has exploded higher and is now a large cap. She explained how people who bought mid caps in the 1990s are rich now. She stated that although international stocks were down about 15% over the last couple of years, everyone should own international stocks for the high returns. Finally, she explained that the plan sponsor had a "managed" investment plan and that one of their advisers would create a custom portfolio tailor made for you, at a modest cost of 1.5% per year of your total assets. She said "you'll see that as a minus on your statement", and winked. Your investments will be managed right up into the stratosphere. OK, she didn't say that last part, which is good, because I remember how people were fully invested in their "managed" portfolios in 2008 and how their losses were magnified beyond the 30% thrashing that stocks took that year. In all, it was about the worst possible advice beginning investors could have received.

I bit my tongue and did not ask how interest rates had done in Japan after their housing bust and how did that compare with US interest rates since 2008?

I didn't ask if international stocks were a good investment when the dollar was rising against foreign currencies.

I didn't ask how their mutual fund expense ratios affected total return over time.

I didn't ask how she slept at night because I don't think she knew any better.

Mainly what I took away from the presentation was "We have a running wood chipper, put your hands in as far as you can."

Friday, July 29, 2016

Deep Fried Twitter Fritter v.10

Twitter teased me last month with a short term trend of smaller quarterly losses. This quarter, they are back to business as unusual with a fresh $107.2 million loss. Fortunately, idiot investors bought 1.72 million newly printed stock shares so they can keep making payroll and paying out fat bonuses. Since the OC fair is in progress, it seemed appropriate to deep fry this edition of Twitter Fritter. You can also get it dipped in chocolate for an extra $1.

Here are the updated GAAP net earnings since they went public.



Updated fundamentals:
1/8/2013 - twitter IPO stock price $41.65
1/3/2014 - twitter high stock price $69.00
1/13/2016 - twitter closing stock price $18.69, 682.95 million shares outstanding
5/11/2016 - twitter closing stock price $14.59, 694.85 million shares outstanding
7/28/2016 - twitter closing stock price $16.31, 696.57 million shares outstanding

Twitter stock change from IPO price: -60%

Dividend: Are you kidding me?
EPS: -0.60

The EPS keeps improving because the number of outstanding shares keeps growing. Denominators for the win!

Thursday, June 30, 2016

The first 50 rolls

During the commodity boom several years ago, I purchased $1000 worth of nickels as a hard asset hedge. At that time, each nickel contained about 9.5 cents worth of metal, based on the price of nickel and copper. Since that time, the price of all metals has plunged and each nickel now contains less than 3 cents worth of metal.

I reasoned at the time that I had little downside risk since the metal was actual currency and could be returned to the bank at the cost of inflation and whatever transportation costs were involved. Metal prices have been low for a long time so I decided to start returning some. Instead of simply turning in the rolls I had received from the bank, I decided to look through each roll for rare dates. The only dates I planned to save were 1950, a relatively low mintage year, particularly the 1950-D, and any war nickels with silver content. I know this was not a productive use of my time, but as a numismatist, it was kind of fun. I have now returned $100 of nickels to the bank and found several anomalies. Out of what was supposed to be 2000 nickels, I found:

1 penny
1 Mexican 5 centavos piece
1 Canadian nickel
2 dimes

A net loss of 1 penny. There were a lot of old coins in the rolls, as far back as 1939, but the only rare date I kept was a single 1943 war nickel. I'll post another update if anything interesting turns up.