Friday, October 28, 2005


(I will edit spelling and add links sometime later).

I am a moron. Disregard yesterday's post. Why would I doubt myself...that is investing with my heart and not my brain.

If I was thinking with my brain I would have remembered the word: volatility.

The stock market is a roller coaster full of ups and downs. The ups and downs is called risk. Beta, if you will.

Its no big deal that my stocks had dropped several percentage points in a 3 day span...(all but one of them bounced back today, and even when they were down, they have still outperformed the S&P500). When they dropped, I should have bought more, but I didn't/don't have any cash.

Here's the point: If you buy quality companies, there will be times when investors "freak out" and sell, even though the fundamentals haven't changed.

Microsoft dropped a few percent because their earnings were 1 cent per share less than analysts' expecations. Does that mean MSFT is any less great today than they were a week ago? Does that mean that they are losing market share, or that their profit margin is waning? Does that mean their management has gone to hell, or their pipeline of products looks bleak. Hardly. It means the analysts were wrong. It also means that their are exogenous factors that affect companies.

Cendant has dropped from the low 22ish to 17 something in a week. Does that mean their ridiculous cash flows are dropping, or that their strong management team isn't as strong as they were last week? Or that their market share is dropping? No they still make money, and the market still doesn't buy their stock. It just means investors are missing a bargain. If a Big Mac dropped in price to 30 cents would you buy it? In a second. Because you understand it. Investors don't understand Cendant, so they are missing this bargain. The fact remains that they continue to generate cash and cash is king.

Stericycle. They have gone up in the last few days....I bought them at 45 in March, now they're in the mid 50s. Thanks to my roomie for discovering this powerhouse.

Petsmart. Petsmart generates cash. 70% of Americans have pets. Pets in the last decade have become an extension of our families. Petsmart has high profit margins off of their services (not products). Everyone overlooks how many people have pets, and how many people think of their pet as a child. If their is a recession, are people going to stop buying pet meds, or grooming their dog? No. In fact Petsmart's sales have been high through the last few years. After Katrina hit they announced that they were concerned about their upcoming quarter because they didn't know where the economy was going. That is more than fair. Every company should be so honest. The fact is when gas was getting up to $3 a gallon (in the midwest) noone could predict what would happen. Famalies were spending several hundred dollars more than they were weeks earlier on gas. That hurts. Petsmart acknowledged that and it hurt their stock. But they are very strong...and the market will recognize that when they announce their earnings each quarter over the next 12 months.

There are my quick summaries of why I own the stocks I own. These companies haven't changed. They are still strong. I believe they are very undervalued. I can't adjust the companies to be valued correctly, just like if a Big Mac was 30 cents, I couldn't convince McDonalds to sell it for a buck something (or whatever they cost)...all I can do is discover the bargains...and buy them. And tell you when I discover them.

(DISCLAIMER: these are my views and in NO WAY the views of the Financial Services company I work for....invest at your own risk. I am merely putting my mouth where my money is.)

Thursday, October 27, 2005

my stocks have sucked the last few days

I have been hit hard the last few days. 3 of my 4 favorite stocks have been battered in the last few days...(so has the S&P, but mine have done worse).

Its hard not to doubt myself in times like this. A very significant part of me thinks I am lucky. This might be the correction that proves that to me.

However, I am not selling my stocks (SRCL, MSFT, CD, PETM). I think that my stocks are even more undervalued than they were before. I think all 4 of them are at a significant discount. But I am out of cash to invest, and I refuse to invest in the stock market with loans.

the point of this post is merely:

If I like to say when I perform, I must say when I underperform.

I put my money where my mouth is, and I have to own up to the (paper) losses.

I hope I am right and SRCL hits 65, CD hits 30+, MSFT hits 35, and PETM hits 30. Those are my price targets for the next 24 months. Otherwise, I've just been lucky the last 6 years.

Monday, October 24, 2005

I will never understand why people invest with their hearts.....

Cendant (symbol CD) is down 8% today, as of the time of this post.

Why? Cendant announced today that they are breaking into 4 seperate companies. Their reasoning is (I am paraphrasing) that the market continually greatly undervalues them. They continually have solid earnings...yet their stock price remains flat.

Of course I have been preaching this since I bought them for the first time 6 years ago.

So they are splitting up so investors can better understand their businesses (travel, car rental, real estate, and hospitality). They have recently sold their marketing division for 1.something billion, and they have spun off several companies. They are restructuring so investors can understand how strong they really are. They assert that each new company is going to have solid financial statements, and investors will clearly see how strong they really are. In this case the parts are greater than the sum, because people don't understand the sum.

So why is their stock being battered today? For the same reason that they are dividing. Because people do not understand them.

If I had any cash I would buy them today. Unfortunately I don't have cash today. (33% of my stock/mutual fund portfolio holds Cendant, am I selling today...hell no!....its on sale!!!!)

Buy it, and hold it for a few years, and then thank me.

Printer Hijinks

Anything you print can and will be used against you

Thursday, October 20, 2005


I appreciate google. I love google. There are few things I don't like about google. I use google extensively, whether it be as a calculator, mapper, directions providor, picture finder (e.g Britney Spears picture finder), package tracker, ISBN looker upper, dictionary, phone book, or what you all use it for: search. I use features of google that most people haven't heard of. I'll post some of my tricks sometime. (here's the first one: I do not go to to search, I goto "google suggest.")

I read the entire prospectus before google went public. I loved it. It was honest. It was bold. I intrepretted part of it as the founders saying "don't buy us, we don't want to go public, but it has become too expensive not to."

I love the plain english that is found on any page google writes...(see the faq).

I love google's politeness. I love google's hippie culture. I love that google only hires the smartest minds. I love the concept behind adsense. I love google's constant innovations. I love google.

But I will not buy their stock. I could have bought a huge chunk at 85. Today its at 335....a little over a year later! When I read their prospectus before they went public I knew it would go up. But its not my investing style. I buy when things go down because of investor psychology. I knew google would go up because of investor psychology. I don't buy when things go up....thats trading with your heart and not your brain....noone's brain tells them to jump on a bandwagon. (If I knew it was going to go up, why not buy and cash out...because if a stock goes up because everyone is hyped over it, then it can go down just as quickly thanks to negative news...when do you jump off the rise?....too hard to guess...and thats just it...its a guess).

Is it worth 335? I don't think so. Is it worth 30? I don't think so.

The truth is I don't know. Noone knows. Analysts pick all kinds of ranges for their stock price. I'm just going to admit I don't know. Google is not microsoft. Microsoft is a near monopoly. Google is hardly a monopoly. I love everything about Google. They are as innovative and honest as anyone out there. They are run like I would run a company. So how could I not like them. I would put everything they do and are on par with microsoft. That is a huge statement.

But if they are equal operationally, innovatively, intellectually, and cross-sectionally why would you buy google stock? All else being equal I'd rather buy the monopoly who's been doing it for a few decades. Microsoft has been doing what google is doing since google's founders were in grade school. Everyone else is bidding up the price of google's stock hoping that they will be the next microsoft....when the next microsoft is microsoft. MSFT hasn't lost a step...only their stock price has. Which means its undervalued.

But go ahead keep buying google, while I buy microsoft...and use both of their products/services religiously.

Never invest/think with your heart...hearts don't make good decisions.

Monday, October 17, 2005

Housing Bubble......

I am totally against the thought of a housing bubble.

What you read in the paper or hear people say is that as rates go up house prices are going to go down because of a bubble. They never say why it should be that way though, so I will. Logically it makes sense.

The way bonds work is as interest rates go up, the price of the bond goes down...and vice versa. Houses are secured by bonds.

So you would expect that as interest rates go back up houses will go down in value. Right? Except the experts are missing the logic that bond prices go down when rates go up, because newly issued bonds have a more attractive rate to investors. This isn't the case for housing. When interest rates go down, people just continue to live in their house and pay their mortgage (easier than they would if they went and took out a new mortgage on a different house). The people that buy CMOs (bonds based on mortgages) expect rates to go up. They shan't mind, because it reduces the potential default risk of homeowners. You know this as foreclosure. Its the nature of the CMO product and thus the CMO investor. They are buying CMOs because of the strong liklihood of repayment, not to make money. If they wanted to make money in bonds they would get more risky corporate bonds.

Is there a bubble? Probably in a few parts of California where small houses with no basements cost half a million. But in places like the midwest, house prices will just appreciate a little slower than they have been the last few years. I would guess 3% over the next 3-5 years. This is lower than average apperciation is a result of supply and demand. There will be less houses on the market, because people will just stay put and stick to their lower rate. Houses will appreciate slower than normal, but I dont forsee them depreciatating.

Side note: there might be a bubble, I doubt it, but there might be. To hedge yourself against this, just buy houses undervalue. If you pay 90k for a 100k house, and it depreciates 5% you are still up $5k!

The wild card will be all of the foreclosures and bankruptcies. 1 in 4 mortgages taken out last year was an adjustable rate mortgage. Which correlates with my assertion that half the people in the U.S. is stupid. These mortgages are great for those people who will move out in 2 years. Adjustable mortages and interest only mortgages will foreclose or bankrupt a large percentage of people who got them to have lower payments. See mortgages are approved on what the payments will be today. But the rates are at all time lows "today" (aka the last few years). When the rates go up, people's salaries are not going to go up as fast, so they will lose their houses. Plus their rates on the credit card debt will go up as well.

amd hopefully I'll be buying their houses.

Tuesday, October 11, 2005

AROD = Cancer

I am thoroughly convinced that AROD is the worst player in baseball and Jeter is the best.

This article gives the most recent example.

You see, any team that AROD is on loses. Yet we live in a country where highlights matter, and winning doesn't. I don't care that you and Barry Bonds are the most talented baseball players (possibly of all time). At least Barry doesn't hide the fact that he is a jackass. A-rod takes a different approach. He loses while acting like he's a team player.

Watch Jeter. He has confidence. He knows how to win. He has that swagger. He knows its his team that wins or loses. He's does everything a leader should do, (e.g. watch who the first person out to greet a player who just had a basehit or a homerun...its always jeter).

Watch A-Rod. He has cockiness. He knows he wants to win. He's insecure, and it shows. He's afraid of messing up.

Thats why Jeter has the rings, and A-rod has stats.

There are people like this in your life. There are people who have all the talent in the world, yet they bring people down because of their own insecurities. They have people that latch onto them. But they don't win.

Then there are the Jeters. These people quietly lead. They get the job done. They make those around them better, and those around them know it. Their teams win.

Sunday, October 09, 2005


For the less observant of you, I periodically make tweaks to this blog without telling you. Now I refuse to change content of my posts without telling you, but I sometimes add links under the archive section on the far right column. Check them out.

Others of you may have noticed the ad I put at the top. Now I clearly do not intend to make money off of that ad. I am merely experinmenting with google's revenue generator. See the ad conforms to the content on the page. So my post about stewie was to give it easy content to understand, which gave the ad clear demographics...a link to buy a stewie DVD.

Google is making a fortune off of these ads. Because they adapt to your page, the demographic audience can be targeted with precision. This leads to more qualified leads, which in turn leads to people willing to pay more for the ads. Google takes it one step further. People buying ad space actually auction for that space...highest bidder wins. Its most intriguing. For more info goto For your viewing pleasure I chose by far the smallest ad. I might ad larger ones just to experiment...I don't get enough hits to expect income off of it. (In the 10 days its been up I've made 13 thanks for various people who clicked on the ad! I am rich!)

******update.....immediately after posting this, I checked the update and the ad now says "buy goog stock for $4"....I in NO WAY endorse buying google stock...I'm not saying they're not good...I love google as a company.....but I do not have a stance one way or another on their stock price.

Tuesday, October 04, 2005

I told you so......

A year ago I posted what is in bold, and then took it down because I was advised to for patent reasons (I have reposted it this morning):

Pirates of the Software-ribbian

In the last few weeks I have gotten back to what this blog should be about. Posting ideas that solve problems, or at least look at problems in a different way.

What is the single thing that hurts software companies more than anything? Piracy. There are several solutions.

1) have the software on DVDs that erases themselves after install.
2) live with it.
3) as more people get on broadband, they can track users by serial number...which will be quite costly.

or my ideas:

1) as broadband becomes commonplace and machines become faster (2 years from now?) have the products available on a central server where you have to pay for a subscription. Similiar to a high tech yahoo games, except you have to pay. This will obviously be expensive...probably more expensive then the dollars lost to piracy.
2) Innovate. Think outside the box. Stand on the table and look around...(ala Dead Poets Society). See things differently. Have corporate accounts continue to pay for licensed software. But for home users that don't want to pay the 1k for Office 2003 Premium Super Duper, or PhotoShop, or whatever, give it to them for free. Lay out the software products similiar to google's search results. On the right side (and where ever) have clickable ads on the documents that take you to the web. (Microsoft, you can finally become a Monoploy...have Microsoft Office products have links that take users to the MSN stores.) What if you don't want the ads? Then pay for the product. There will be far fewer licenses out there, so it would now be feasible for the software companies to monitor serial number usage. Better still someone could start up a third party company responsible for tracking serial numbers. (similiar to credit bureaus, or background check companies). This third party company would have an immediate monopoly with the first mover advantage. Eventually you could even have a smart search engine within the document (similiar to Amazon's technology) that customizes the ads based on you.

Why don't I do any of this? There's only 24 hours in a day. Either someone is going to come out of nowhere and pay me to be a think tank, or I am going to stay on the career quest I am on...(portfolio management). But I'm going to throw ideas out there.

I have emailed Bill Gates, Mark Cuban, and Adobe on the above. We'll see if anyone replies.

Well this was taken from the news today:

Microsoft down on concerns over competition from Google, Sun (MSFT, GOOG, SUNW) By Tomi Kilgore
NEW YORK (MarketWatch) -- Shares of Microsoft (MSFT) fell 2.3% to $24.91, and was the biggest percentage loser among Dow industrials components, after Goldman Sachs suggested that Google (GOOG) may eventually offer a product that competes with Microsoft's Outlook product, and its Office product as well. Google and Sun Microsystems (SUNW) have scheduled a press conference for 1:30 p.m. Eastern time. Analyst Rick Sherlund is uncertain about what will be announced, but he feels the company's could easily build a version of Sun's StarOffice office productivity software that could be delivered over the Internet, just like Google's Gmail and instant messaging services. "StarOffice has not gained much traction, but with Google, maybe it could do better hosted on the Internet, mostly in the consumer market," Sherlund said. He added that given that Google already has GMail, "so why not an integrated calendar and contact manager, and why not just offer a more fully functional Office like product." Google was last down 18 cents at $318.50 and Sun Micro was up 7.2% at $4.49.

*********Greggie's comments:

Now don't get me wrong, I am not insinuating that google is taking my ideas...they probably started devolping this years before I suggested it...what I am saying is I have a knack for anticipatory thinking, yet everyone thinks I am a joke. Noone takes me serious because I didn't go to Harvard, and noone takes me serious because I see things at angles that seem impossible, but these angles change the world. Want proof? See above.

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