New Thoughts in Brief as it relates to Systemic Risk
I was laying awake last night in bed and might have come to an interesting preliminary conclusion in regards to systemic risk.
I’ve been thinking about my analysis on the European Crisis and I’ve questioned my assumptions regarding systemic risk with regards to the scope of the limitations to ownership. In regards to this perspective, the European Crisis isn’t a crisis. It’s simply a temporary situation that will be papered over by governments slowly restructuring and bailing each other out until they figure out how to explain what they are doing and eventually develop a mechanism to make what they’ve been doing all along more sustainable.
The thinking behind this new approach is effectively that systemic risk is actually systemic when bailing out the system involves transfer payments from the rich to the poor. For example, in 2008, there was no way that the rich were going to bail out all of the poor people in the united states that had signed up to own a home that was effectively bankrupting them. This was a truly systemic crisis because it involved banks potentially writing down all of their “assets” because their assets were declining in value at a rate that was quicker than they were able to generate cash from operations, effectively with the ultimate risk of pushing them completely underwater, where I opine they sit today if they were to mark everything to market. Fortunately this new perspective of systemic risk adjusts for these political factors. In the situation that we are seeing in Europe, sure this is a large vendor financing Ponzi scheme, but is it advantageous for the rich to continue to propogate this type of system? Probably. If they ever decided to hold people accountable to what they owe, there would be disasterous consequences. More or less, everyone experiences some sort of advantage the way things are structured in Europe under the present system and it is very easy for the governments over there to keep bailing large institutions and governments out. That said, if this was a crisis where the people who needed to be bailed out were the poor people who had taken excessive risk and now were in over there head, you’ll never see bailout wealth transfer payments of this nature.
Overall, this is still a new concept to me, that systemic risk is limited by those in charge being willing to perpetuate lazy politics and the status quo, because not doing so is disasterous to their portfolio and their ability to rule effectively. As long as they can do it, they might as well. Fraud to a certain extent increases the velocity of business because you have people out there working when they shouldn’t be. This isn’t necessarily a bad thing, but of course consequences always are in the future.
I guess you could say that I’m saying that sure, the European situation is structured impossibly as it stands today, but that doesn’t mean that it isn’t solvable. It is. Their perpetual bailouts indicate that things are not going over a cliff. If the USA ever balances our budget, we are toast. Same goes for Europe. And then I don’t even need to begin pointing fingers at China, the biggest liar of them all… who is actually in a recession and is trying to cut rates to stimulate their economy that really doesn’t exist and is driven by exports which are falling and a housing Ponzi scheme that is collapsing along with it basic materials and metals.
So I guess you could say, that this is certainly a perspective that would suggest it might make sense to own banks at these prices, because those in charge will fight tooth and nail to prevent them from collapsing and folding on themselves and thus, a currency printing war will put a floor in the global commodities and real estate market eventually, along with a tighter supply of various materials. Things aren’t so bad under this paradigm… but then again, don’t forget that things are presently structured for a complete collapse, but that doesn’t take into account the inevitable bailouts and actions by central governments and central planners. If it’s stupid to bet against them, might as well bet with them when the wind is behind them.
That’s all I’ve got for now, but things aren’t as dire and debilitating as I thought they were because I should have been taking into account that the rich will take care of themselves.
When I wrote the last email, I was replied with the following ideas: MEG, AAPL,
Their case for the stocks are below:
If you like LEE you should like MEG. MEG was impacted due to LEE’s pain…specialized papers and olympics (NBC) and elections should be a solid catalyst.
Mario Gabelli largest shareholder of MEG.
Welcome back.
Also take a look at MNI, and YLO in Canada
I just started working at a start-up fund in London (good things happen when you publish stuff on the internet), and we’re looking at all of these. We are still looking at a few Asian stocks, based in HK mostly, which never dilute and pay out generous dividends. The only u.s.-listed chinese stock I would consider touching is PWRD.
I met a guy last week that owns shares in VALV and KGJI. It took everything I had not to laugh in his face.
SPIN:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=69614152
No problem. There are also many, many other reasons to believe in AAPL for at least the next couple years. For instance, why do I think iPhone can grow substantially going forward and why will margins expand?
Iphone 4 is now $100 and iPhone 3GS is now “free” on contract. Per industry sources iPhone 4S is the #1 selling smartphone on Earth today (it’s not Ben on 100 carriers yet), iPhone 4 is the 2nd best selling smartphone, and iPhone 3GS is the 3rd best selling smartphone. ASP could come down a bit due to iPhone mix (3GS asp ~ $425, iPhone 4 asp ~$525, iPhone 4S asp ~ $650). However, iPhone margins will expand since the 3GS has the best margins (it uses 2.5 year old components) of any iPhone. Iphone 4 uses 1.5 year old components so its margins should rival the 4S even at the lower asp. And iphone 4S offers a 64GB model for the first time which should push up ASP and margins. Per analyst checks, the 64GB model is 20% of 4S sales.
So we should see margin expansion with large volume expansion. Keep in mind that industry analysts project 50% smartphone unit growth each of the next two years. Apple just has to maintain its smartphone share to blow away all current AAPL revenue and eps estimates. And what if apple grows iPhone by 100% again next year (as it has every year since it launched)? Remember it still has a longgggg way to with increasing its carriers worldwide.
Sent from my iPhone
On Dec 5, 2011, at 9:29 AM, “Glen Bradford” <globalspeculation@gml.com> wrote:
> Thanks so much for taking the time to point out weaknesses in my argument.
> I’ve read them and forwarded them to a few people who are also
> interested in your opinion.
>
> If you are right, apple is a steal. Could be “the next msft” and good
> for another 200% to fair value.
>
> Do Not Lose,
>
> Glen Bradford
> CEO ARM Holdings LLC
> www.glenbradford.com
> www.armholdingsllc.com
>
>
>
> None of the above is intended as investment advice. I can’t guarantee
> the information I gathered is from an accurate source. I may buy or
> sell any stock or security without prior notice.
> Disclaimer: http://www.glenbradford.com/disclaimer.php
>
>
> —–Original Message—–
> From: Adam p [mailto:adamp@yhoo.com]
> Sent: Monday, December 05, 2011 12:18 PM
> To: Glen Bradford
> Subject: Re: Email List Revival
>
> Glen,
>
> All legitimate concerns except when you consider:
>
> iPhone has 5% global phone market share and less than 20% smartphone share.
> All phones will be smartphones in a few years (>1B units sold per
> annum today).
>
> iPhone is currently on ~250 carriers worldwide. RIMM’s blackberry is
> on 600+ carriers.
>
> Conclusion – iPhone has massive headroom.
>
> iPad is a new Product that dominates a growing category. How big will
> the market be? Nobody knows but many speculate it will e bigger than
> the PC market (350MM units per annum). If this is true, Apple can lose
> half it’s market share (it won’t) and still double volumes each of the next two years.
>
>
> I won’t even go into Ma continuing to take significant share or
> unannounced future products. On iPhone an iPad along AAPL will go much higher.
>
> I recommend you read a book called The Innovator’s Dilemma. Only after
> reading it can anyone understand what Apple does.
>
> Best of luck to you too.
>
> Sent from my iPhone
>
> On Dec 5, 2011, at 6:17 AM, “Glen Bradford”
> <globalspeculation@gml.com>
> wrote:
>
>> These analysts are good at charting trends and forecasting
>> exponential growth curves. My question is when does the exponential
>> growth model stop holding up? That I don’t know.
>>
>> Sure apple is cheap if you look at their historical trends and
>> forecast them forward and they are cheap based on their last few
>> quarters projected forward ex cash.
>>
>> http://boombustblog.com/BoomBustBlog/Yes-That-s-Right-The-Only-and-I-
>> M
>> ean-th
>> e-Only-Investment/Research-House-To-Warn-Of-An-Apple-Miss-Is-Vindicat
>> e
>> d.html
>>
>> http://boombustblog.com/BoomBustBlog/Sliced-Apples-For-Dinner.html
>>
>> sure reggie is a little crazy, but what happens if their margins get
>> cut significantly? Then it is like 32x earnings ex cash and they
>> aren’t growing..
>>
>> it’s just tough for me… and this worry is why I don’t own it…
>> maybe I’m stupid. I hope so and I hope you make money.
>>
>> Do Not Lose,