Thursday, April 29, 2004

GOOGLE IPO to fetch $2.72 BLN

The largest IPO of the year would value the oft-used search engine with the likes of Dial Corp (DL), Healthnet (HNT), International Rectifier (IRF), and Biovail (BVF). The 2nd place IPO, Assurant Inc, pirced for $2.024 BLN. I can see the underwriters licking their collective chops for this one- crank up the promotional engines!

My new idea is to create a search engine called "GOGGLE" for people who can't spell too good. It will include a Microsoft Spell Check built right into the search. Another idea is "BOOBLE"- a search engine for porn.

Tuesday, April 20, 2004

GM and the Incredible Shrinking Cash and Carry Trade

Headline: GM Earns $1.3 Billion or $2.25 Per Share in First Quarter 2004

GM's global automotive unit accounted for $611 million, while GMAC (the finance and insurance unit) accounted for $786 million. Financing operations alone accounted for $442 million in the quarter, which is 34% of the entire number. The finance number was up $140 million from a year ago, aka 31% higher, reflecting "lower credit-loss provisions".

The old adage, "live by the sword, die by the sword." GM's earnings have basked in the sun of the cash-and-carry trade for too long. GMAC's favorable credit rating allow it to borrow capital at a rate not much higher than the nearly free money fed funds rate of 1%. They can turn this financing around and lend it to potential car buyers at a higher rate, thus making a profit on the disparity in interest rates.

Checking the GM website, they are offering $1,000 bonus cash plus 0% APR financing for 60 months on most trucks and SUV's for qualified buyers. Not only are they willing to give cars away, but they will also pay you to take one. My guess is that they also book the forward revenues they expect to receive after 60 months as profit when a transaction occurs.

This shady financing brings some interesting questions. First, if finance operations account for 34% of the number and have increased 31% in the past year (due to a favorable interest rate environment), what happens when rates increase? How will earnings be impacted when the yield curve flattens (ie- fed funds rate trades closer to the 10yr), when they are forced to borrow at the same rate charged to customers?

Could you imagine if Wal-Mart announced that 35% of their earnings came from their credit card business? Why doesn't GM deserve the same amount of scrutiny? The same policies that are a boom to business now will someday be a bust...

Thursday, April 15, 2004

MEMO TO OSAMA: Re: the "truce." Go fuck yourself.
My soon-to-be-married college roommate brings up a great point, after I pointed out that Che Guevara would be rolling in his grave if he say the pretty penny being made off his face...

"it's one of the true beauties of our current system: when something becomes counter-culture (and counter the capitalist structure) such as grunge, che-guverra, Gen X-ism's, hippie culture, etc. etc. -- it's turned commerical. bastardized. to a point where it's a parody of its former self and used to make $$..."

Monday, April 12, 2004

US: The Anti-Imperialist Nation (at least monetarily)

The Fed can only control either the supply or the price of money and credit, but not both at once. They can set the price- an interest rate or an exchange rate, or they can regulate the supply. The Fed chooses to control the funds rate, while the Bank of Japan and the People’s Bank of China manage by an exchange rate through the supplies of dollars, yen, and renminbi. Even though the Fed has not been buying dollars to make the 1% funds rate stick, foreign bankers have been accumulating enormous amounts of greenbacks which they have, in turn, reinvested in US Treasury and agency securities.

In the past twelve months, foreign central banks have purchased $262.2 billion of US government securities, while the Fed added only $32.7 billion. In total, the foreigners own $1.1 trillion of our debt, while the Fed only controls $738 billion. In effect, although the Fed ordered the funds rate to 1%, it was the heavy foreign purchasers of short-dated US paper that were instrumental in getting it there.

The caution here is that Japan is seeking to create demand, and thus inflation, and will therefore continue to buy dollars until they generate income growth and rising prices. The same also applies to the selling renminbi and buying dollars by the Chinese. Until the maniacal buying of dollars stops, “real”, or inflation-adjusted, interest rates will stay low, perhaps one full percentage point below the norm, which has been averaging 2.8% in postwar data.

Sunday, April 11, 2004

Leadership of the Barbarians

Over the weekend, I re-visited Leadership Secrets of Atilla the Hun, written by Dr. Wess Roberts. Leadership, the book contends, is the privilege to have the responsibility to direct the actions of others in carrying out the purposes of the organization, at varying levels of authority and with accountability for both successful and failed endeavors. Here are qualities which all effective leaders must possess:

1. Loyalty- above all else

2. Courage- to act with confidence and to excel in times of uncertainty or danger as well as in times of prosperity.

3. Emotional Stamina- the ability to recover rapidly from disappointment

4. Physical Stamina- a body not properly used becomes abused, and a healthy body supports a healthy mind

5. Empathy- an appreciation for and an understanding of the values of others. Must not be confused with sympathy.

6. Decisiveness- Knowing when to act and when not to. Vacillation and procrastination confuse and discourage subordinates.

7. Anticipation- the ability to foresee thoughts, actions, and consequences.

8. Timing- applying the lessons learned from failure.

9. Competitiveness- the intrinsic desire to win.

10. Self-Confidence- a personal feeling of assurance derived from proper training and experience.

11. Accountability- never blame others for your own failures.

12. Responsibility- essential quality of being fit to serve

13. Tenacity- the quality of unyielding drive. the strong persist and pursue through discouragement, deception, and even personal abandonment.

14. Credibility- words and actions must be believable to both friend and foe.

15. Dependability- a king must depend on subordinates.

16. Stewardship- a caretaker quality, which encourages confidence, trust, and loyalty.

Monday, April 05, 2004

New Subway Rules

While riding the 6 train to work this morning, I was inspired by the nonsensical ramblings of a born-again Christian. Hey, I've got no problem with God, however, I don't find it necessary to be tortured by someone's religious beliefs while I am trapped in the subway. Due to his mind-numbing rants and consistent usages of double negatives, I came up with a great idea to make the subway system a more pleasant ride for everyone.

We will designate the 2nd car of a subway train as the "Entertainment" car. It will be reserved for anyone wishing to sing a capella, profess their love for jesus, play the accordian, sell batteries or M&M's, beg for change, or pass out and urinate themselves. We will also make this car the one devoid of air conditioning in the summertime. That way, we could all choose to commute to work in peace, and these aforementioned groups can readily entertain one another. Anyone caught "entertaining" on a non-public car will be fined and ticketed by the MTA.

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