Thursday, August 10, 2006

Minyans in the Mountains III

Minyans in the Mountains III officially begins tonight at 7:30pm in Vail, Colorado. Faithful Minyans have been converging on the Vail Cascade Resort & Spa over the past few days with the main event now only hours away.

Tonight's agenda features the Cocktail Reception and Opening Keynote Address with Michael Santoli. Sign-ups are pouring in and the breakout sessions are filling up fast, but there will be plenty of room left for our delayed Minyans.

For those of you who could not make it: please keep your eyes on this Blog for photos and updates and, starting tomorrow, be sure to tune into CNBC for live coverage of Minyans in the Mountains III.

Monday, August 07, 2006

Five Things You Need to Know: ...Text Messaging

By Kevin Depew

Incoming: Text Message

Apparently, while text messaging is popular overseas, it's not really catching on here in the States, according to Business 2.0 magazine.

  • Text messaging - or SIMS, as it's more commonly known overseas - is widely popular overseas, but has yet to really catch on in the U.S., the article says.
  • Users in Ecuador send on average more than 200 SIMS messages a month.
  • Americans send only an average of 50 messages each month, however.
  • The article notes that what's so weird is that while Americans may be 10 times as wealthy as Ecuadorians - they have a paltry per capita GDP of $4,300 compared to $42,000 here in the U.S. - they send four times as many text messages! What gives?!
  • Why would Amer... uh, pardon me for a moment, looks like I'm getting a text message...

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Friday, August 04, 2006

Being Contrarian With Jos. A. Bank

By Vitaliy Katsenelson

Jos. A. Bank (JOSB) is up close to 6% after reporting truly unbelievable sales numbers for July: same store sales were up 16% and total sales were up 28%. July's performance has validated my view on the stock that you are about to read.

What does it really mean “being contrarian?” Doing the opposite of what everybody else is doing, all the time? What if you agree with what everybody else is doing? Should you disagree for the sake of being contrarian?

“Being contrarian” means being able to think and act independently of the crowd and not be swayed by the crowd thinking. It means to stay on your own autonomous thinking track, independently of the direction the crowd is taking, even if it requires going against the crowd. It means not accepting (though respecting) the market’s wisdom unconditionally, but attempting to develop an opinion of your own.

Yogi Berra’s saying “In theory there is no difference between theory and practice. In practice there is,” could not be more true when it comes to contrarian investing. In theory it is easy to be able to think and act independently; however, in practice it becomes a very lonely and trying experience. Emotions that we don’t experience in the theoretical state overcome us in "the in-the-practice-state."

Investing in Jos. A. Banks requires the investor to be a contrarian. Wall Street hates the stock for sending share price from the mid 40s in April 2006 to the mid 20s. The stock is trading at a pitiful 12 times forward earnings. The stock has been slaughtered as Wall Street did not care for the earnings miss in the first quarter coupled with higher inventories.

At this price, the market expects no growth from the company, but the market could not be more wrong. Here is why:

In December of 2005, JOSB delivered 20% same store sales; management has likely expected this trend to continue and has built up a significant amount of fall inventory. However, weather was not on the company’s side, the spring ended up being warmer. The 20% same store sales comps of December did not come through in the following months and that, coupled with warmer springs, sent management on a fall close discounting spree. Management admitted that it was too aggressive in discounting fall merchandise, with the benefit of hindsight it did not have to do that.

It is hard to tell what the next quarter will look like, but that would be focusing on the trees in the forest and not on the forest. However, the future (the forest) appears to be bright for this company. I recognize that managing business involves making decisions under uncertainty. In the first quarter, management made a mistake, I believe that mistake will have little consequence in the long-term fundamental picture of JOSB.

Inventory is Not An Issue

Retailers live and die by their inventory; it is the lifeblood of their retailing business. Too little inventory means the company doesn’t have enough goods to sell, too much inventory means the company has to heavily discount merchandise in order to clear the inventory. So here is the perceived bad news about JOSB – its inventory days have almost doubled over the last six years from 173 days to 334 days. It is twice the amount of its most comparable competitor, Men’s Warehouse (MW) whose inventory days have stayed in a very stable range of 153-169 days over the same time frame. That is just bad, isn’t it? On the surface, inventory numbers look terrible.

Over the last six years since the new management team has taken the reins of Joseph A. Banks, it has intentionally increased inventories per store. Why am I not worried about high inventory levels? Not all inventories are created equal. Inventory increases at a grocery retailer, like Kroger (KG) may lead to higher spoilage and thus lower profitability. Teen apparel retailers, like American Eagle Outfitters (AEOS) and Abercrombie and Fitch (ANF) need to have a fairly high inventory turnover, as teen preferences for the size and location of holes in their jeans could change with Britney Spears' new CD. However, when it comes to men’s apparel, the men’s tastes rivals the speed of the ice age. Blue shirts and stripe suits have been in fashion as long as...well, forever.

Instead of looking at JOSB's inventory as a risky, unstable assets which may have to be discounted by the retailer to clear the shelves (which is usually is the case for other retailers), one should look at it as an investment in long term assets, not unlike investment in store improvements. Though increasing inventory per store is counter intuitive for retailers that strive to achieve Wal-Mart (WMT)-like inventory efficiency, JOSB customers come to the stores only once or twice a year. The company wants to...

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Tuesday, August 01, 2006

Five Things You Need to Know: The Ghost of Greenspan...

The Ghost of Greenspeak
By Kevin Depew

The chief executive of Penguin Publishing's parent company Pearson, said yesterday that Alan Greenspan had agreed to allow a ghost writer to help give his memoirs more "pace," the Times Online reported.

  • Dame Marjorie Scardino, chief executive of Penguin’s parent company Pearson, said yesterday that Alan Greenspan had agreed to allow a ghost writer to help to “make [his memoir] more pacey — because Alan is an academic.”
  • Dame Marjorie said, however, that the former US Federal Reserve Chairman is proving to be “a diligent author” who will definitely help his publisher to make a return on the $8.5 million spent to secure the rights to produce his memoir.
  • After a daring early-morning raid that did not involve the use or injury of small animals, Minyanville has uncovered a rough draft of a paragraph from Mr. Greenpsan's unedited memoirs:

Alan Greenspan's Unedited Memoirs, opening paragraph:
"We may not be able to usefully determine at what point my contributions as Federal Reserve chairman and, later, ad hoc economic advisor, will slow or even reverse, but it is evident that the greater the degree of international flexibility, the less the risk of a crisis. Should globalization continue unfettered and thereby create an ever more flexible international financial system, history suggests that current account imbalances will be defused with modest risk of disruption."

The Ghost of Greenspeak

Yeesh. After reading the excerpt above, I see what Dame Marjorie means. Good lord, Sir Alan Shake Spear-me-in-the-brain so I don't have to read one more word of that horribly boring prose! That text is dry as West Texas dust! It's as exciting as a fly in an ice cube! Greenspan doesn't need a ghost writer, he needs a ghost rememberer! Ok, enough. Even though I got plenty more of those, I'll stop because you get the point: dude needs a ghost writer.

Below is the same Alan Greenspan memoir paragraph massaged by potential ghost writers!

  • Alan Greenspan's Memoirs, as ghost written by Herman Melville:
    "Call me Ishmael. Although my real name is Alan Joseph Greenspan. Some years ago - never mind how long precisely - having little or no money in my purse, and nothing particular to interest me no shore, I thought I would sail about a little and see the watery part of the world, and periodically adjust short term rates to manage inflationary pressures and the occasional bout of undesirable declines in the general rate of inflation."
  • Alan Greenspan's Memoirs, as ghost written by Richard Wright:
    An alarm clock clanged in the dark and silent room. A bed spring creaked. A woman's voice sang out impatiently:
    "Alan, shut that irrationally exuberant alarm clock off!"
    A surly grunt sounded above the tinny ring of metal. Naked feet swished dryly across the planks in the wooden floor and the clang ceased abruptly. So far there is little evidence to undermine the notion that most of the productivity increase of recent years has been structural and that structural productivity may still be accelerating."
  • Alan Greenpan's Memoirs, as ghost written by Thomas Pynchon:
    "A screaming comes across the sky. It has happened before, but there is nothing to compare it to now. It is too late. The evacuation still proceeds, but it's all theatre. The federal funds rate must rise at some point to prevent pressures on price inflation from eventually emerging. There are no lights inside the cars. No light anywhere."
  • Alan Greenspan's Memoirs, as ghost written by Hunter S. Thompson:
    "We were somewhere around Barstow in 1998 on the edge of the desert when the drugs began to take hold. I remember saying something like "I feel a bit lightheaded; financial intermediation, although it cannot alter the underlying risk in holding direct claims on real assets, can redistribute risks in a manner that alters behavior." And suddenly there was a terrible roar all around us and the sky was full of what looked like huge bats, all swooping and screeching and diving around the car, which was going about a hundred miles an hour with the top down to Las Vegas."
  • Alan Greenspan's Memoirs, as ghost written by Franz Kafka:
    "Someone must have been telling lies about Alan G., for without having done anything wrong he was arrested one fine morning. His landlady's cook, who always brought him his breakfast at eight o'clock, failed to appear on this occasion. That had never happened before. G. waited for a little while longer, as the conceptual share of the value added in our economic processes expands further, the ability to think abstractly will be increasingly important across a broad range of professions. Critical awareness and the abilities to hypothesize, to interpret, and to communicate are essential elements of successful innovation in a conceptual-based economy."
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