Archive for January, 2006

Was I Wrong In My Prediction… ?

Posted: January 30, 2006 in Uncategorized
Back on Sept 8th, I made a "bold" prediction that the Dow would top 11,958.36.
I based this on an amazingly interesting trend… that the Dow has had killer performances in years ending in "5" since 1905… double digit growth each and every decade… a whopping 34.6% average gain.
Turns out, 2005 was a dud.  As was my prediction.
Or was it?
Let’s look at the rest of the world in 2005:
     France        23.4%
     Germany       27.1%
     Italy         15.5%
     Japan         40.2%
     UK            16.7%
     Average       24.6%
The rest of the world performed like the US should have… but didn’t.
What gives?
Who knows, I don’t.  Could be a number of very complicated reasons.
Or, maybe just a simple observation:  Are we finally — really, truly — a more globalized economy these days?
Damn, I should have thought more globally when I made my prediction… ! <grin><groan>
P.S.  I took these figures off a badly faxed copy of the Wall Street Journal so I apologize if I’m reading any of the numbers incorrectly.  Anyone know a website that tracks yearly global market indexes?
I’ve often said that modern art is simply intellectual bullshit.
Not that I don’t love modern art… I do.  But I look at it as entertainment, both visually and intellectually.
I remember a curator talking about a piece of modern art.  "Look at the coolness pervading off the canvas!"
What?!  It’s a white, unpainted canvas! 
The fact that someone could really delve into it — not the artwork (there was nothing there!) — but the concept of what is supposed to be there was highly entertaining, almost challenging to me.
I mentioned this belief to a friend in a throw away conversation about a year ago… and guess what?  She went off and did her graduate thesis on it!  150 pages of why modern art is simply intellectual bullshit.
Awesome!  Bullshit about bullshit.  <smile>

What Is An American?

Posted: January 23, 2006 in Uncategorized
As most of you know, I don’t do a lot of political commentary here.
But, something was recently forwarded to me that I have to share.
Apparently there is a recent report that someone in Pakistan had posted a reward in a newspaper to anyone who killed an American… any American.
I can’t verify if it’s true, nor can I verify the rebuttal written by an Australian dentist.
But — whether this scenario is real or not — the forwarded piece is about the best description of "What is an American" that I have ever read… one that I think all parties can agree on.
"An American is English, or French, or Italian, Irish, German, Spanish, Polish, Russian or Greek. An American may also be Canadian, Mexican, African, Indian, Chinese, Japanese, Korean, Australian, Iranian, Asian, or Arab, or Pakistani or Afghan.
An American may also be a Comanche, Cherokee, Osage, Blackfoot, Navaho, Apache, Seminole or one of the many other tribes known as native Americans.
An American is Christian, or he could be Jewish, or Buddhist, or Muslim.  In fact, there are more Muslims in America than in Afghanistan . The only difference is that in America they are free to worship as each of them chooses.
An American is also free to believe in no religion. For that he will answer only to God, not to the government, or to armed thugs claiming to speak for the government and for God.
An American lives in the most prosperous land in the history of the world.  The root of that prosperity can be found in the Declaration of Independence , which recognizes the God given right of each person to the pursuit of happiness.
An American is generous. Americans have helped out just about every other nation in the world in their time of need, never asking a thing in return. 
When Afghanistan was over-run by the Soviet army 20 years ago, Americans came with arms and supplies to enable the people to win back their country!
As of the morning of September 11, Americans had given more than any other nation to the poor in Afghanistan.  Americans welcome the best of everything…the best products, the best books, the best music, the best food, the best services. But they also welcome the least.
The national symbol of America , The Statue of Liberty , welcomes your tired and your poor, the wretched refuse of your teeming shores, the homeless, tempest tossed. These in fact are the people who built America .
Some of them were working in the Twin Towers the morning of September 11, 2001 earning a better life for their families. It’s been told that the World Trade Center victims were from at least 30 different countries, cultures, and first languages, including those that aided and abetted the terrorists.
So you can try to kill an American if you must. Hitler did. So did General Tojo, and Stalin, and Mao Tse-Tung, and other blood-thirsty tyrants in the world. But, in doing so you would just be killing yourself. Because Americans are not a particular people from a particular place. They are the embodiment of the human spirit of freedom. Everyone who holds to that spirit, everywhere, is an American.

GOOG Messin’ With MSFT?

Posted: January 21, 2006 in Uncategorized
When GOOG announced that its earning call was Tues, Jan 31st… the very last day of January… I thought it might be a problem. 
Most well-run high-tech companies pride themselves on closing the quarter quickly and efficiently.  Any delayed announcement usually means something has gummed up the works, never a good thing.
But, as I looked at my earnings calendar and saw MSFT’s Thurs, Jan 26th announcement date, it struck me: 
Do you think the GOOG folks are just trying to overshadow MSFT?  I mean, this is just the type of prank that GOOG (a.k.a., a bunch of college kids) would pull.
I always said that a huge part of Microsoft’s success was it got more free publicity than any company on the face of the earth.
So, I wonder how much MSFT’s timing influenced GOOG’s… and if Google just stole another page from Microsoft’s playbook?

INTC Earnings: A Different Story

Posted: January 18, 2006 in Uncategorized
On the other hand, INTC is a different story.  Certainly seems like they fell asleep at the wheel. 
Good thing the world can’t get enough microcomputer chips… that’s enough to wake anyone up.
I’d be a wimp if I didn’t respond to the YHOO earnings announcement — since, along with GOOG and MSN, YHOO is one of the "Big 3" that I believe is leading this online advertising revolution.
So, let’s start off with The Ugly.
Can you get worse headlines?  "Yahoo! Gets Crushed."  Yikes.
How about The Bad?
Can you get worse stock performance?  YHOO’s down around 10% this morning.
Is there any Good?
YHOO’s business fundamentally performed, though it’s very difficult to figure that out reading the company’s Q4 report.
Terry Semel, YHOO’s CEO, mentioned a bunch of "one-time charges" and "required for future growth" stuff.  That kind of thing definitely affects results so in this case, maybe revenue and operating income growth — about 40% — might be a better indicator how the actual business is doing.
Most businesses would kill for 40% growth.
More importantly, it’s right in the middle with future and trailing P/E… and the general rule of thumb is a stock is correctly valued when its P/E is about its growth rate.
Amidst this morning’s carnage, some people actually see the report as a glass half-full:  RBC Capital Markets just upgraded YHOO.
Ultimately, though, why does it feel like a disaster this morning?
A couple reasons:
*  In comparison, YHOO really is growing top line revenues more slowly than GOOG.  Somehow this translates into YHOO not carrying its weight as a business.

*  Bottomline, people love expectation blow-outs.  Witness GOOG and AAPL.  Here’s a great quote from the "crushed" article:

     "There is nothing there that is a particular problem," says Martin Pyykonnen, an analyst with Hoefer & Arnett who rates the shares strong buy and doesn’t own them. "It’s about beating expectations and coming out ahead, and they didn’t do that."
As I like to say:  The market is always wrong in the short-run… and always right in the long-run.
Wow.  I wonder if Jonathan Berr of or Mark Stahlman, an analyst for Caris & Co., has been bugging my office?
Jonathan just wrote about the interview he did with Mark and I can’t tell you how many conversations I’ve had almost exactly like this… right down to the very logic.
So — I’m biased — but this is a brilliant analysis of why the excitement for Google (and by extension Yahoo and MSN) is credible… and incredible.
For example:
      "We believe that Google’s addressable market has a chance to become much larger, more quickly than initially anticipated, perhaps a $100 billion annual sales company over time," Stahlman writes. "Google is not limited to the size of today’s advertising market and is likely to expand into next generation financial services, and health care, among other digital service opportunities considerably larger than typically recognized."
     In an interview, the 57-year-old Stahlman, who as an investment banker wrote the prospectus that brought America Online public, stresses that he believes that the excitement over Google is different than the hype he saw during the Internet bubble of the late 1990s.
     "We now have the technology to actually build out digital services," he says. "We didn’t have broadband available in the 1990s. We didn’t know how to build grids of computers."
The article discusses Mark’s back-of-the-envelope calculations (using the same logic I use) for GOOG hitting $2,000… !
The only difference in our analysis — and it’s a huge one — is I haven’t thought past Google, Yahoo!, and MSN being bigger than $20 billion entities… but it’s now officially time to… and Mark does so in this article, brilliantly I might add.
Stop what you are doing and read this RIGHT NOW.

I recently got in an email conversation with a financial journalist about why GOOG and MSFT are behaving the way they are (i.e., MSFT is treading water while GOOG is going straight up).

Thought you’d enjoy the note.



Hmmm, not sure it’s fickle.  I mean, it’s not like Microsoft has been standing still, they’ve had amazing rev growth over the last five years for their sized company. 

But, Google is going to be a $20 billion company before anyone knows it… and that’s what the market is valuing.  

The interesting thing about the Bill Gates announcement a month or so ago (the Windows Live stuff) is Microsoft’s now "enlightened" commitment to the ad market.  

To put it in perspective:

The top 500 companies in the enterprise software mkt do about $310 billion… don’t get me wrong, I think there’s plenty of new, innovative growth that can be gotten here… but one can also argue that Microsoft can’t sell 10% more Word’s because it already owns 98% of anyone that would buy the program.

But, the overall ad market is $400-$600 billion and online has only taken about 2-3% to date (or something like that)… in other words, the fastest way for Microsoft to get to $80 billion in revs is to fight-like-hell to capture 10% of the overall ad market… a completely new, virgin market (so to speak).

GOOG, YHOO, and, yes, MSFT will reap amazing benefits transitioning the world from traditional to online advertising.  

I spoke with Mary Meeker at a conference about this and she said (unofficially) that online should take 15% of traditional advertising "falling off a log" in the short run (more when truly interactive TV hits!).  

In other words, GOOG, YHOO, and MSFT will be primary recipients of $60-$90 billion relatively shortly.

Investors don’t quite understand the actual magnitude of this but in GOOG’s case "b-e-l-i-e-v-e"… to a lesser but still great extent investors "believe" for YHOO, too.  But they don’t see it yet for MSFT… which is why I think MSFT is stuck… investors can’t see this growth driver yet.

Sure, Vista and Office releases are great but will only help keep the current businesses chugging along.  (Which, by the way, every business in the entire world would *kill* to have.)

And, Xbox is doing *phenomenal* things in the market but it’s only going to get a portion of a $25 billion market.

No, the real growth in MSFT’s future is the *massively* big and brand new online advertising mkt.  BillG finally realizes it.  Investors haven’t, though.  Should be interesting when they do.



Sure I can. 
Good or bad, no matter what kind of year you had, New Years means better times are always just ahead.
Happy belated New Years, everybody — hoping 2006 puts a big smile on your face!