GlobalSpeculation.com
Bargain hunting for the sport

I don’t usually post on these types of things, but I figure that the internet really sucks at giving you any additional information on how to do this. My dad actually used to own a computer store, called ARM Computing LLC. Anyway, 16 years later and then a hiatus, I picked up the name ARM Holdings LLC as the name of my business.

Anyway, I bought a new computer in January with the idea that I could set up 3 screens on it no problem.

Well, I was wrong. Setting up 3 screens is a problem. That is if you’re like me and you get frustrated when you drag a notepad document across the slower screen and it slows down your computer.

If you are only doing 2 screens, then you can get a cheap $100 graphics card that plugs into your PCIe port that does dual output and most motherboards these days come with a PCIe 2.0 x16 slot. There are several kinds of slots that are important. PCI is different from PCIe (PCI EXPRESS).

Note that I’m only interested in top of the line budget graphics. I don’t need the video games, but I do like 1 GB memory graphics cards. I prefer NVIDIA 3D vision capable graphics cards as I intend to write 3D software to help me analyze stocks in the near future.

So, basically, if you want 3-4 monitors, look for a mother board that has 2 PCI express 2.0 x16 slots set up in such a way that there is a gap between them, the motherboard will probably say that it is SLI compatabile, which is the NVIDIA technology that turns 2 graphics cards into one through the power of parallel processing technology and a bridge connector.

If you want to do 5-6 monitors, you need to look for mother boards that are advertised as being capable of 3-way sli — which is hooking up 3 graphics cards and turning them into one, but you wont be doing this… as you’ll be using them independently.

If you want 7-8 monitors, like I wanted to, this is where it gets hairy. you need the motherboard of a super computer. the x58 classified has 7 pci express x16 (x8) slots and you need a larger case, i think only 10 qualify, and a top of the line power supply to power everything.. probably 1000 watts+. i think it’s 10 expansion slots in the case.

anyway, then if you want to do 3D you need to find projectors or lcd monitors that can operate at 120 Hz. The reason for this is that the 3D glasses you’ll be using run both eyes at 60 Hz on opposite frequencies so that each eye sees a different picture.

if you want more screens than this, this is where you have to start losing video processing power, or start doing cheats.

windows 7 only handles 10 monitors, but you can get around this by basically using advanced video cards to treat two monitors as  one… I think you can get up to 24 in total this way, not sure. I wouldn’t consider past 16.

As for me, I’ll likely end up with a setup of:

a laptop/projector combo

a 3 screen i7 solid state computing backup computer

a computer that i have yet to design but will control everything else using a nifty program called synergy:

http://synergy2.sourceforge.net/

the computer i’m designing will either be 3 screen 3D nvidia vision surround or will likely be something that you’d find like this:

http://www.digitaltigers.com/zenview-arenaultraelite.asp

P() – Probability Function

E() – Estimated Value Function

InvestorRipCord – Investor  ”Panic Sells”

GlenAggressive – Glen Trades Investors’ account as if it is his own

GlenDoesThis – Glen understand investor is a threat to himself and dials down the trading style for that portfolio to be in line with the investors unrealistic expectations of how markets work.

P(InvestorRipCord|GlenAggressive) = 90%
P(InvestorRipCord|GlenDoesThis) = 10%
E(GlenProfit|InvestorRipCord) < E(GlenProfit|!InvestorRipCord)

Thus: GlenDoesThis

Anyway, this explains why I would trade in such a way that is not actually the most reward while taking what I perceive to be the least amount of long term risk. Heck, I can do whatever I want to in my portfolio though.

Funny thing is that as the deals and opportunities get better, the probability that the investor pulls the rip cord also go up. In other words the two below can increment simultaneously:

E(Profit)++

P(InvestorRipCord)++

This would be directly out of line with the expectations that “markets are efficient” as better expected profits actually come with increasingly selling oriented attitudes from investors.

It’s a dividend stock. It’s a growth stock. It’s a value stock. It’s a short squeeze. It’s marginable. It is optionable. Insiders are buying. It’s everything you want and more. They’re growing at over 100%. Their forward P/E is around 5. They’re going to be paying out 5-10% of their net profits semi-annually beginning with the six-month period ending Dec. 31. The stock’s trading at less than its comparable FMCN, which makes 1/3 as much per share. It’s in the fastest growing part of the world. It makes a currency that is set to be revalued higher. China MediaExpress Holdings (NASDAQ: CCME) is going to make me a fortune. Right now, it is not the cheapest stock in the world. But, you can’t find anything even close to this in terms of “the stars are aligning for the sole purpose of higher prices.”

The way I see it, you have choices. You could join all the other hooligans that are out there buying up Baidu.com and Youku.com. You could sit in US Dollars while you watch the US government monetize our deficit and interest rates rise in other parts of the world before they rise here. Heck, you could even use your money to start your fireplace.

Anyway, I’m saying it. This is the best stock in the world, bar none, at the current price, at the current point in time. I figure someone should say it. That someone ought to be me. It’s been said.

Disclosure: Bradford and his investors are long CCME at the time of publication.

“Why not?” – Trust, Mr. Lambo, and Constraints

By Glen Bradford

Abstract: This is something that I wrote for myself and decided to share for the reason of, “why not?” It’s me going over the historical relationship with two investors and identifying my weaknesses. Knowing some of my weaknesses is key to my future success. I didn’t really revise this after writing it or edit it — so it might not read very well and I’m OK with that as it’s simply an exercise for me to organize my thoughts. It actually reads like a elementary schooler’s paper written in crayon.

Investor 1: Not Mr. Lambo

It all started through a referral. At first, it was his son that wanted to invest through me. I went and met this particular investor’s son. The son was interested in me mostly because he had heard good things about me. The way he had found me was by looking at my track record and he asked me about my track record for the majority of the conversation, about what I could do going forward, and defined risk as stock volatility and advised me that if a stock fluctuated down 10% or more that he would sell it. We met and briefly discussed the terms under which I would operate and I agreed to them — even though I was uncomfortable with the terms. His conditions were that I would email him stocks worth buying and that he would buy them on his own in his own account and then compensate me out of realized profits. Under these conditions the amount of capital that he was going to be trading on my stocks was 1/100^th what I was already doing.  Thus, I determined post-facto that this was going to be more hassle than it was worth. I ended up calling back his son the next day and advising him that under the conditions agreed upon I would not be comfortable saying, “I will not lose your money.”

So then, around 6 months later, I find out that his father is interested in seeing what I can do and the size he wants to invest is more substantial and the terms enable me to place the trades. I figure, “why not?” So, I meet with the father, and I ask him to define risk. He defines it at stock price volatility and I advise him that risk comes from overpaying. We talk a little more about my ideas and I tell him that if he’s not comfortable that’s perfectly fine with me. I go home.

I get a phone call a month later. He’s placed money in an account and away we go. The first thing that I did wrong in this case is that I invested his money as if it were my own. This may sound ideal in terms of maximizing future rates of return, but was not ideal in terms of me managing his account in line with his risk profile. So, I invested half of the money into American companies and half into Chinese companies. He was not very confident in the Chinese portion of his portfolio. Anyway, the American companies did terrible, and what would normally have been a smaller position for me became larger because of his request to maintain at best 50/50 (America/Chinese). So, things progress and the Chinese companies were shaking around in price and I got into some absolutely fantastic bargains in this man’s portfolio (52-week lows). About a week after that I get a phone call asking to liquidate by the end of the week (“I’m going to cash”).

So, I put a sell order on everything and let that sit for a couple days and some of the stocks sell. Also, note that at this point in time my computer is on a moving truck, I’m operating from a laptop in a hotel room in Richmond, VA, and that I’m apartment hunting 10 hours a day because the moving truck shows up tomorrow. So, I get a phone call at 3:30pm on Friday and asking, “Can you get everything into cash by 5pm?” Meanwhile, I’m thinking, that’s 30 minutes, I’m currently operating off of terrible internet connection that I’m borrowing from either Starbucks or a Train Station that I could park under, and these stocks are illiquid considering that the amount he wants to sell on some of them is greater than the average daily trading volume. I decide that it’s obviously not in my best interests to try and sell intelligently in this case because this investor doesn’t care about making money anymore. I find internet access at around 3:43pm and put market sell orders on everything and the stocks get murdered. So, what did I do wrong?

1. I treated the investor’s money like it was my own. His risk tolerance was pretty much that of his son’s. A drawdown is a bad thing in this land but a consistent 8% return is a huge win. I should have invested 10% of his money and left 90% in cash. But then again, under those parameters I might as well have said “I can’t make you money” from the beginning.
2. Investors that find me through referrals and value my track record more than the methodology behind the track record should be turned away — because these are the investors that are going to sell bottoms.
3. When people can see their money fluctuate on a daily basis — the risk of them panicking goes up significantly from when they can see their money fluctuate on a monthly or annual basis — regardless of the risk adjusted perceived future absolute returns.
4. Once an investor starts to worry, the worry is magnified even if you make their money back, for fear of losing it again. Breaking even is a reason to liquidate.
5. Although most of his losses are directly attributed to American companies and his gains were from Chinese companies, he still liquidated due to fear of losing money and due to fear of owning Chinese companies.

Investor 2: Mr. Lambo

So, you might wonder why I have him saved as Mr. Lambo in my phone. Mr. Lambo is short for Mr. Lamborghini. Actually, I should call him Dr. Lambo — but oh well. My first encounter with Mr. Lambo was while I was on the big island of Hawaii with Mr. Hawaii on his give or take 10-acre private beach, complete with his own private water that was passed to him mostly because the property used to be owned by kings and queens back in the day. I guess that gives reason for a sidestory about Mr. Hawaii.

So, I send a few emails to RedChip a year or two ago and I don’t know how it happens, but I guess RedChip mentioned to Mr. Hawaii a few of my stock picks and was like, “What do you think?” I guess Mr. Hawaii recognized that they were my picks and was like, “Yeah, those are Glen’s — I read his stuff and think he’s brilliant.” So, now RedChip is interested in meeting me. I fly down to Florida to meet with RedChip and do a video interview. Ends up that Mr. Hawaii calls in and I tell him that I’d get a kick out of it to fly out to Hawaii for 2 weeks before school starts, “Why not?” He agrees, and I fly out by myself to hang out in one of his condo’s. We meet up and after hanging out with his wife and him for a day – they collaborate that I’m not a crazy person and invite me to stay in their guest house on their private beach instead of the condo. Freaking awesome. Anyway, those two weeks were spent hanging out, doing nothing, sorting stocks, reading books, conversing, swimming in private lagoons with tropical fish, trying to surf, wandering the property, and pretty much having a BLAST. So, halfway through this trip, I get the phone call from Mr. Lambo. He wants in.

Before I even get to talking about him I want to point out the thing I respect the most about him is his consistency. He may occasionally make what I perceive to be a poor decision or two — but I admire the way that he does it.

So, off the bat I’m up 20% on paper in the tradable account. He’s excited. We work on a private placement. A month later, the tradable equities decline in value and he panics and liquidates. This panic also flows into the untradeable private placements and I work with a few brokerage firms to make the shares tradable as soon as is reasonable — meanwhile the price is fluctuating violently. Up and down 50% in a month give or take. Also note that net of all things, he’s never been at a point of losing money and is for the most part up 40% or more at all times — subject to violent fluctuations that sometimes have him up over 100% on paper, etc. He gets frustrated, as I do as well, due to things outside of my control. I advise him to blame me, because it’s my belief that you should always accept as much blame as you can because passing blame is no way to get ahead. I feel like this story is starting to stink — probably because I am writing this in 2 sittings and this is sitting number 2.

Anyway, so I send in unrestricted stock to a broker and it takes more than 40 days to for them to realize that it isn’t restricted, and to unrestrict it on their end to make it salable. Needless to say, I just finished closing all my accounts with said broker — oh wait, except for one. It’s the account that I have to keep because Mr. Lambo won’t let me leave them. Mr. Lambo insists on sticking with this broker because of his developing uncomfortableness of trusting me. I can see that and understand where it all comes from.

1. When the Longwei Private Placement went through, I advised him that we could sell 6 months into it. It really took about 7, and meanwhile large sales went through and drove the stock down and he was furious that we weren’t the ones selling.
2. After all, confidence comes from portfolios being green. The first problem was that the side portfolio was red.
3. He went away on vacation while I had sent the broker the shares and while the broker was figuring out “why are these restricted?” When there was no restrictive legend — long story resulting in me being on the phone with them on a daily basis for 3 weeks —meanwhile the stock dropped 40% and I didn’t sell any and he demanded to know why? Fact is that I couldn’t, but then again in a side portfolio I had a small quantity of shares that he had advised me not to sell. He asked me why I didn’t sell them. I accidently mentioned that this was also the time that I was searching for apartments 10 hours a day in Richmond — he saw this as a weak excuse — and it was.
4. He can see some of his accounts fluctuate — and he watches them on an hourly basis (I figure) and experiences a lot of visceral pain whenever these volatile stocks tick down by chance.

So, the resultant of all this mess is that now Mr. Lambo doesn’t really trust me. I don’t know why I have cash in accounts with his name on it because he has asked me not to do anything with it. In other words, I can’t trade it. He trusts the broker though (E*Trade). I’ve asked him to move to interactive brokers but he refuses. In the past, he wanted to see me buy and sell stocks like I intend to now over at Interactive Brokers — and he would have been pleased for me to do it as I intend to now — but now things are obviously heading in the wrong direction. If I was a fire fighter, I’ve gone from preventative maintenance to full blown fire fighting it would appear.

So, now I’m being micromanaged by Mr. Lambo. He tells me when to buy and when to sell. Historically he has lost millions of dollars selling low. Now, I receive phone calls asking me only to sell lows. I don’t really have a choice even though legally I am the one in charge. I could disobey him and make him a lot more money, but what’s the point in that? That would be a lot more troublesome. It’s a lot easier to just do what he tells me to do even though I know it’s backwards from what is profitable sometimes. I just lined up an opportunity for him to make over 100% fairly easily and he turned it down because he’s uncomfortable with how things have gone.

So, here’s the question, if I can’t buy anything, private or public, and I can’t sell anything unless he tells me to and he is driven to sell low — how am I supposed to make him money? Somehow, against these odds, I’m making him money right now — a lot more money than anyone else is making him — I figure. Like I said, it’s in his financial best interests for me to directly disregard what he says sometimes and do what I think is best. I am pretty sure that within 1 hour of me doing something like that though, that would be the end of it. So my options are as follows:

1. Disregard him, make good decisions, and have him close his accounts tomorrow and probably sue me.
2. Listen to him and do what he says and avoid getting sued / death. The consequence is making less money.

So there you have it, the positive feedback loops are sending things in the wrong direction. Anyone have ideas in terms of how to turn things around or a way I can present information in such a way that I could convince him that he should just let me do what I think makes the most sense to do? The idea, is I’m only here to help him help himself. I’m only interested in continuing this if I can turn things back around and start doing things that I want to do instead of things I’m forced to do. I don’t want to be a broker and I don’t really see the need to be one. I think he sees me as a broker. That might be the problem. Why not?

Anyway, I was in a conversation last night with some banker, and I’ve been in a lot of these conversations lately — where they ask me why I am not looking for new investors. I advise them that I just don’t want to deal with the hassle and that you run into a lot of additional paperwork when your AUM goes $25M+. Might as well avoid that as long as possible. Plus, I want to strategically avoid people that are prone to selling low. That’s pretty much everyone. Makes it tough. But, I have narrowed it down to a few heuristics. Just avoid anyone who finds me from my track record, asks me about my track record, and when asked about risk, defines it like they do in MBA school. Avoid anyone that doesn’t understand that I like to buy the most undervalued companies in the world —- and thinks it’s just magic. Avoid anyone that believes in luck, etc.

Youku.com (NYSE: YOKU), no offense, but you are way overpriced. Sure, it’s fun and sexy to trade at impossible valuations when you go public but look out below. I call them as I see them. This is like paying $1,000,000 for a new Toyota Corolla just because Paris Hilton is sitting in it. This is worse than US Treasuries. Heck, it’s my understanding that YouTube isn’t even profitable yet. Future profits are just a dream for Youku.com. How do you discount future net losses and arrive at the current valuation? Beats me.

Author’s note: If I can put in a theme song to this article: http://www.youtube.com/watch?v=N6O2ncUKvlg

They just went public selling around $200M in securities. That’s not bad until you realize that they’re not profitable and that comes at roughly $60M in net revenues at best this year. At $42, the company is currently trading at a valuation of $4.3B. That’s roughly 70x sales. For this company to trade at 1x earnings it would have to double in size six times in a row. Then, bless them with a 5% net margin when they are currently operating at a 65%+ net loss (For every dollar or revenue, they lose $0.65) and it’s still more expensive than Google (NASDAQ: GOOG) and Apple (NASDAQ: AAPL) — both of which I said were good buys in October of 2008.

For those unfamiliar with stocks, Youku.com being a good value is EXTREMELY unlikely. This is similar to the valuations you’d have seen during the 2001 Nasdaq market highs. Absurd. Why would you buy this when you can get companies growing at double digits, at 1/100th of the valuation? 99% off? Does that appeal to you? It should.

The only thing that is going to make this go up is short term herd mentality. In other words, it’s a race to find someone dumber than you to sell this to at a higher price than you paid for it. As long as that works, the price may continue to rise. When that changes, look out below. As such, I’ll be sitting on the sidelines waiting for things to turn and then I’ll ride the proverbial sled down a very huge, steep hill and have a blast doing it. In the meanwhile, I’ll continue to invest in what I perceive to be the most undervalued corners of the market and of the world. One thing I am certain of — this is NOT it.

Disclosure: Bradford currently holds no position in the companies mentioned but intends to go short in the near future.

I was bored… read your blog

Here’s my lightning round on your tickers

AKRK – maybe after r/s
bki – no idea
CAGM – nope, exporter
CCGY – too expensive
CDBT – lol
CGDI – what a cluster… eff. this is a situation where “knowing what’s actually happening” could be hugely profitable. AGREED
CGYV – still pink?
CHCG – joke of a company
CHFI – scam
CHGI – always looked like garbage to me
CHGY – maybe some day
CHLN – cheap, won’t like rate hike
CHME – loser, and no pharma stuff for me
CHNG – nope
CHNR – nah
CHWY – never heard of
CIWT – nah
CKGT – yep.
CNOA – joke of a company
CNYD – 20% lower yes
CPHI – nope, no pharmaceuticals
CRUI – yes
CSGH – below .70 maybe
CSGJ – yes, cheap
CSOL – low .20′s
CSUN – no
CXDC – yes, lt winner
CYXN – no pharmas, just a gamble
FEEC – lol, maybe below .20
FUFW – no idea what that is
FUQI – immediately after they sorted out their shit
GCHT – not anymore
GFRE – yes, but cheaper
GHII – cheap, won’t like rate hike
GSI – steel, no thanks
GU – no
HFGB – definitely
JADA – definitely below .20
kun – nah
LEGE – LOL
LPH – yes
LTUS – yeah
mcox – never understand why people would buy clothes online
NEP – yes, at 5
NEWN – yes
ORS – they are DEAD
PFAP – no idea what that is
PHIE – kinda, yes
PUDA – below $10
SBAY – no, looks like a trial and error business model
SCLX – after secondary yes
SCOK – no, maybe mid-2011
SGAS – too small for their industry (see CNER)
SGZH – yes, tgt $12 for 2011
SNEN – what is that?
SOPW – this is a joke
SRRY – sure
SUTR – no steel here
uec – no idea
WEMU – liars

Nobody — apparently. Nobody is listening. That’s fine. That’s about what you’d expect when you find something that actually is undervalued. Louis Navellier allegedly just left the building. He’ll likely be back.

It’s funny to me that this particular company is getting sold off. Take a look at how fast they are growing. What kind of multiple you’d pay for this kind of company?

The analyst report from RedChip suggests that 8x earnings is what you should be willing to pay. That’s $5.20. Look, I’m not going to poke fun at analysts, but any mutual fund manager would love to buy a stock growing this fast at more than 16x earnings.

You want catalysts? I’ve got a few.

Crude Oil prices are rising. Not only that, but in terms of US Dollars they are going to increase from here as we are currently at Peak Oil — been at Peak Oil since 2004. Energy demand in China is going to squeeze oil prices higher there and especially in the US. Get ready for it.

Global Money Flows to China. Where is money going to flow globally? China. Why? Because they are raising interest rates — and this attracts investment capital. Not to mention that the Shanghai and Hang Seng still have upside to their markets before they are overpriced. If Longwei listed on one of those exchanges, it would likely sport a 30x multiple or greater.

Expansion to a New Facility. It’s likely to happen in the next 12 months.

The Yuan will rise against the Dollar. Longwei earnings will be magnified in terms of dollars as this happens.

Besides, who wants to invest in the US Treasuries when they can invest in Yuan dominated securities that will likely be revalued higher when the Chinese lets the Yuan float? I said you should be shorting US Treasuries a while ago using something like TBT. Still a great investment thesis but honestly making tens of percentages is a joke when you can make hundreds of percentages.

Disclosure: At the time of publication Bradford and his investors were long LPH common, LPH preferred, and LPH warrants.