my two cents

Dear Paul and folks at Intel,
in the 80′s Intel built the math co-processors, which made it possible for heavily computational applications to move from the main frame to the desktop;
in the 90′s Intel built the graphics processors in response to the demand for better (graphical) user interfaces (Windows).
But now Intel is just building multi-core processors. It is not enough. You need to create something really important!

Here is your next multi-billion dollar business:
Design and build a freaking co-processor to aid dynamic virtual machines.
The web has become sophisticated, but is also becoming CPU intensive. And the current software-based Virtual Machines (javascript, Java, etc.) can’t give the user a radically better experience without better hardware. I am really sick and tired of sluggish, CPU-intensive, memory-hog browsing experiences. Please, please, please, figure out how to build hardware to support dynamic virtual machines. Everyone who uses a web browser will love you, and will buy the “Intel Inside” product.

A few days ago eBay announced that it was going to be extended the length of the title on listings/auctions from 55 characters to 80 characters. A former colleague of mine blogged about the change and offered a couple of pieces of advice to sellers on how to take advantage of the change, from a SEO perspective. Having being out of eBay for over a year now, my opinion should be objective, both as a consumer and as an investor.

First, why are eBay users not buying stuff? Or in eBay’s language: why is the value of a CRU falling and Active users declining?
The answer is simple, because eBay sucks. No, I am not angry at eBay, in fact, I love the brand, I love the company, and I love the people who work there. But from a pure customer perspective, it just sucks. No matter if you are a buyer or a seller, eBay has an exceptional ability to leave you feeling like you have just been kicked in nuts (or other similar discomfort if you are not familiar with it) sooner or later…most often sooner. Let me elaborate with a couple of examples:

• 
  Bad Policy: A friend of mine listed an authentic brand name handbag with a buy-it-now option. A Canadian seller bought the handbag but was not happy with the Canadian Customs tax and demanded that the seller pay the taxes or the buyer would leave a negative feedback. After negotiating a discount for taxes, the buyer submitted a claim on PayPal, claiming that the bag was a fake and eBay’s policy was that the ‘bag should be destroyed by the buyer’ and a refund would be issued. So, the seller is out 1 bag, shipping fees, custom taxes, insertion fees, final value fees. The buyer has successfully scammed a free bag and some pocket money, but not without eBay’s enthusiastic “buyer protection” program. As a casual seller, why take the risk? It would have been cheaper to give it away or even Craig’s List.
• Bad Tools or inadequate platform: This one comes from a seller who is a Small Business specializing in refurbished computer and electronics components, mostly B2B. He has listed lots of 8-piece CPU units for sale. A buyer buys a lot and reports that 1 of the units is not functional. The seller gives the option for a replacement unit or a refund for 1/8th of the cost. The buyer opts for the partial refund. Submits the claim to PayPal and PayPal refunds 100% of the purchase. The buyer then creates several new accounts and tries the same trick, successfully obtaining 32 CPU units for free. The seller contacts PayPal but paypal is unwilling to do anything. PayPal states that the refund policy and buyer protection policy are in effect, and instructs the seller to contact local police if he thinks the buyer defrauded him.
  As a small business, the seller hardly has the time to deal with the issue and does what he knows best: increase profit margins in order to be able to absorb the losses. And how can he increase gross profits? By charging higher shipping, refusing refunds, shipping only within US, etc. In other words, he takes a more defensive and antagonist stance.
• As a buyer…
  I recently bought a projector that claimed to support HDMI and 1020p resolutions. A few hundred bucks for the item plus $15 shipping. Not a bad deal. When I received the item, I hooked it up to my PS3, pop in a Bluray disc, but the image was only 430×540. I checked the settings, and the instructions booklet, and apparently that was the highest resolution possible. I contacted the seller, and the seller kindly explained that the projector’s input supports the various formats and resolutions, but the output is only capable of 430×540. Seller apologized for the ‘misunderstanding’ and was happy to have the item returned and to refund the amount of the item minus the shipping fee. The cost of returning the item would be, of course, at my own expense. The seller gave me the return address….in China. Even though the item was claimed to originate from the US and the seller claimed to be a US seller. The cost of shipping a 12-lb projector to China: $180.00, added the original shipping fee of $15.00 and I am out $200.00.

Needless to say, my shopping activity on eBay has stopped since I left eBay. Even if eBay hijacks the Google search results and saturates the page with links to its site, it won’t make me forget the bad experience. Would I ever shop again on eBay? Yes, of course. There might be something old and rare which can only be found on eBay and it doesn’t cost more than $20, then I would take the risk. But don’t expect much.
I don’t have any problems finding items on eBay. I can search on eBay, use Google to find eBay deals, and even click on eBay direct marketing emails. My problem is really transacting on eBay. Its the ‘one-size fits all’ solution. It is the uncertainty of how much time I will be required to spend resolving a problem when something goes wrong. It is the money I will be out of pocket if something is not wrong. Fix those problems first. The buyer should NEVER be required to pay for shipping on returns. You are forcing buyers to eat a bug, and quietly turn away. If eBay has issues with copyright or intellectual property rights, don’t let the buyer be the judge, have you heard of escrow service? Protect both, buyers and sellers at the same time.
Of course I can only speak for myself, but if you try to Google the subject, you will find that my examples above are quite common.

One of my daily rituals to start off the day is to turn on the TV to the financial news of the day. As news of the prior day and the over-night action in Europe gets priced into the stock market, prices fluctuate significantly such that, when magnified by the corresponding options, making a little pocket money is not difficult…as long as you don’t become two greedy and try to make a killing .

With the fast moving action, I become almost glued to my chair, watching every tick in the stock chart, and moving my open orders up or down and try make the best of them. I would love if my job was doing this (or maybe not), but as most of you, I, too, must get off my chair and get to my regular job. About an hour or so into trading, I must start to get ready for my regular job. Getting ready doesn’t take much, just shower, shave, brush teeth, etc. I hate going away from the computer, because the opportunity to make a buck may show up just at the moment when I am not there. And it is almost unthinkable to go off to shower, etc. and leave open orders completely unattended for 30 or so minutes. But I do just that. I add a little more room (lower purchase orders and raise sell orders by a bit).

When I get back to check on my orders, invariable the stock has moved favorably, sometimes past well beyond my order’s price. It is nerve-wrecking to think “if i had been here I could..”, but no point to cry over spilled milk. If my order was a sell, and it went thru, i must remind myself to “not be greedy”, and dollar earned is a dollar gained (well, minus taxes). If my order was a buy order and the current price is lower by then…well, less try to get another bottom to lower the average price down. But this approach is dangerous as you can become pinned down and overexposed.
So, what is it with stocks between the 10:30-11:00 hours? I am doubtful that my being in the shower has anything to do with it, but all I am looking for is a patter. I will start to take multiple showers every morning and see how it goes…..

Or does it?  Well, it sure has the ability to make itself disappear.  And if you had such a power, what would you rather do?  I know I would not chose sleep…

By now you are probably tired of hearing and seeing all the bickering and infantile behavior displayed by our respectable and caring elected officials.  I used to be fond of British politics and the bickering between the members of the House of Lords and members of the House of Commons.  But what we are seeing in Washington is far more entertaining to say the least.  I would be able to enjoy the spectacle if it wasn’t for the fact that the results (or lack thereof)  will have direct damaging effects, and indirect long term damaging effects due to the direction the country will be led towards.

My speculation is that the business and financial community are (and will continue) to send their message to Washington by two means:

• Trading, redeeming, or buying insurance against Treasury bonds will signal to Congress that the cost of operating the government will rise and the cost of carrying the national debt will increase.  The net effect can be equivalent to increased spending minus the benefit of the economic stimulus that actual spending would have.

• Moving capital out of Securities and parking it on the sidelines for caution, or reinvesting it on safer assets.  The only consolation here is that at least the EURO is also in the dog house these days, otherwise we could see capital fleeing the US.  The impact will be (as are seeing now) a drop in the stock market indexes, which is a commensurate of economic prosperity/decline, at least by the general public.  The real effect will a decrease in value for 401k plans, pension funds, and other diversified investments.  These, every one will notice!

How can we play the market and make a profit?  The first step is trying to identify what the market will do, and anticipate.  Some people will do what investors are doing and move their investments into cash or other hard assets.  Then jump in the market as soon as the crisis is over.  Others will sit tight, close their eyes, and ride it out.  I personally, like to get into options.  Buy leaps 30, 60 or 90 days out. The crisis will not last more than a few days (there is no real crisis, this ‘crisis’ has been created by the lack of compromise of the political parties). The market should recover in a couple of weeks to some extent.  So 30 day leaps should give you a good chance of making money in the way up.  If the crisis doesn’t get resolve in a few days, and if the market continues to drop, i will be preferring the 90 day leaps. The 90-day leaps will be maturing right in the middle of earnings season, and by then the crisis will be forgotten, and (unless there were damaging effects to the economy), and the environment should be full of cheer and expectations.

my two cents….

Amazon is one of the stocks that baffles me constantly.  From a valuation perspective, the stock would be highly overpriced. With a P/E of 92, it is 4 times more expensive than EBAY, 6 times more expensive than Yahoo! (YHOO), and 3.8 times more expensive than Google (GOOG).  Even Apple, which seems to have unlimited creativity, and historically has been able to monetize it better than any one else, sports a modest P/E in the teens.

However, Amazon, as a company, surprises me.  At some point in the past, I saw the company as nothing more than a “beefed-up” eBay category.  And I was not willing to give the company more than a few years of life.  Why not?  Because I was looking at Amazon in the present, and assumed the company did nothing more than operate their business, day in and day out….and a business that was going by the way of the dinosaurs at that.  A company that sells books in an environment where everything is going digital didn’t seem to have much of a future.  But Amazon reinvented itself.  And took a page or two from its rivals.  Amazon started to offer a trading platform and chipping away at eBay.
It started to offer electronic media and digital readers, chipping away at Apple.  And more recently, offering Cloud computing services, eating away at Dell, Microsoft, and other technology providers (even if at a very infinitesimal level).

So, how should we play Amazon? Well, as old wisdom tells us: ‘when in Rome, behave like Romans.’ so should we, when in the Amazon, behave like monkeys.  And what I mean by that is, you should put aside the logical explanations of why the stock has nowhere to go but down; you should abandon any perceptions of ‘reasonable valuation’, and if you can forget for a moment all the ‘mathematical’ ratios and models, do so.  Instead, look around in the marketplace to see what others are doing.  If you see the monkeys cheering and feeding, join the beasts, behave like one, and blend in.  When you see them running for the tree tops, get a hold of the first branch you see and climb up the tree. If you stay behind trying to figure out the ‘likelihood’ of being eaten by a bear, you are likely to become bear poop!