Thursday, May 31, 2012

MTGE's New Offering Defers ~42¢/sh

At Seeking Alpha, I show how the at-NAV issuance of the new MTGE shares gives shareholders a tax benefit akin to indefinite deferral of 42¢ of income, without requiring a tax-deferred account. This is a single-instance case of the hidden deferral available when ACAS-managed mREITs issue shares following the earning of taxable income.

Since ACAS is now a taxable entity, this indefinite deferral amounts to about 15¢ per MTGE share of income tax it won't pay (or tax asset it won't consume). With 2m shares, this is a $300k one-time bonus. ACAS has done this already this year (I didn't do the math on the first secondary offering), and will surely do it again at its managed fund. Growth in ACAS' holdings of MTGE work to its advantage both by growing its management fees and by growing the fair value of its holdings of MTGE.

Enjoy the new article!

Saturday, May 19, 2012

Lumia & iOS: You First. No, You.

The Siri virtual assistant and Lumia's voice-controlled search function each reportedly complement each other as the 'best smartphone ever'. Assuming Siri's results are coming (as they appear) from Wolfram, those results are subject to change. Of course, the next time the Lumia is updated, it's likely to have a new "feature" inserted by Microsoft's marketing department to control bad spin.

But for now, it's a battle of complements. You first. Oh, please; after you. No, I insist, really.

Gotta love it.

Friday, May 18, 2012

Adding to AAPL

I've been a bit busy to write new entries, but in the interest of full disclosure wanted to mention that a new purchase of Apple today and the purchase made in the course of my long/short AAPL/RIMM position (the RIMM leg of which closed last month at a gain of about ), I have doubled my AAPL position this year. That is, accumulated 2012 purchases equal my pre-2012 holdings. This raises my average entry price, but at current earnings growth the P/E is just too good at these pullback prices for me not to participate.

In other news, in a hamfisted and clumsy move I tried to enter a covered call on DNR and ended up entering a naked put, which executed. Come Monday, that will reflect assignment over the weekend at $16. Whoops. Object lesson: read everything you click. That review pane has a purpose. The company's been volatile, and its product is oil, so the current ~$15 won't last. I'll be looking to exit at least some of my post-accidental-additional-purchase position in the next few months.

Thursday, May 17, 2012

Apple Crushes Cell Phone Market Target

Apple continues to amaze in the cellular arena. After having dramatically overshot its original objective of taking 1% of the global handset market, Apple has over the last four quarters doubled its share of the cell phone market to 7.9%.

That's not 7.9% of the global smartphone market, but 7.9% of the whole cellular market – smartphones, feature-phones, dumb cell phones, prepaid phones, etc. Of even greater interest than Microsoft's apparently headlining smartphone partner Nokia dropping from the world's leading vendor by volume (not by profit; it's lost money consistently for a while even despite Microsoft's cash injections) to the #2 slot, is that the #2 ranking is achieved with a product mix that's only 16% smartphones. By contrast, Samsung's product mix is 43.9% smartphones. Apple's is 100% smartphones. The difference in market segments addressed by each company explains how Samsung and Apple seem to be the only handset manufacturers currently making money in mobile phones.

Further reading:
Investing In Smartphone Failures (you can make money on predictable failure)
Apple's 'Share' In Jeopardy? (Share of unit sales isn't share of profits, which is literally where the money is)
Playing Microsoft's Mobile Victory in China (if you believe in a MSFT victory, the play is MSFT and not its commodity hardware vendor partners)

Saturday, May 12, 2012

Inevitable Decline of Apple (Not)

After refuting Forrester's CEO's claim that Apple would inevitably decline as a result of Jobs' death, I spotted another Apple-is-Doomed article, this one baldly asserting without any evidence that Apple's margins were about to be cut in half. The only argument in the second post was that Apple's margins would attract margins-cutting competition.

That is how a commodity market works. As a differentiated product vendor, Apple isn't making hardware on which users will run the same OS as they would on an HTC, Nokia, or Samsung handset. Apple owns its own OS and doesn't pay a licensing fee to Redmond for it, and it has the ability to shut down hostile applications found in its ecosystem. Apple can nimbly make hardware changes, knowing exactly where the dependencies are and what APIs must be tweaked to give developers the same (or better) results they had on their development platforms.

Apple's products aren't coming under pricing pressure so much as they've been discovered to be supply-constrained in am international market famished to devour even more product. By year-end, China will be as large or larger a market for Apple than is the United States. Next year, China will be Apple's largest market. And they love the brand.

That's differentiation. It's how Gillette maintains pricing power in razor blades. Some folks just don't get it. Apple differentiates with branding and technology and user-experience and makes more than anyone in its material markets.

Short if you want, but I'm happy to stay long. At P/E <14 and profit growth ~100%, this isn't a company you will find many times in your life.

After A Year, Windows To Get Thunderbolt

Last year, Apple's customers were delivered a lightning-fast new multipurpose peripheral bus called Thunderbolt. Apple's displays now get their video via Thunderbolt, and the displays' USB ports and other expansion options transmit their data back to the Macs via the small but fast Thunderbolt cable.

Based on the work of Intel software engineers' work on drivers, machines running Microsoft's operating system will get access to Thunderbolt later this year. Thunderbolt has two effects. First, small-factor machines with a little Thunderbolt port will be able to connect to things requiring a larger interface when connected to a Thunderbolt display (e.g., Gigabit Ethernet ports are larger than Thunderbolt, and don't fit on a MacBook Air). Second, whole controllers that previously had to be inside a machine and could not be made plug-and-play (e.g., SATA or RAID controllers) can now be made part of a peripheral, and the OS will be none the wiser because Thunderbolt hides these details from the OS. On OS X, this means hot-pluggable devices that could not have been hot-pluggable; forthcoming "certified" drivers will enable this under Microsoft's operating system, too.

Another point in favor of Thunderbolt is that with 20GB/s throughput, it should handle all the system's I/O just fine (including the monitors). As more Thunderbolt devices are made, the cost should come down for Mac users who want them. Moreover, as MS-Windows begins to access Thunderbolt hardware, more Thunderbolt monitors will appear and will offer some competition for Mac users who presently have but one monitor vendor.

The good news? Customers may never need a RAID card again. Hardware controllers can live just fine at the end of a Thunderbolt cable. This promises to free users from the risk of obsolete controllers. Let's just hope our Thunderbolt buses keep up with our outrageous demands.

Humor Through the Ages

When asked about the anachronistic appearance of incessantly recurrent vulgarity throughout the scripts of his HBO's hit Deadwood, its head writer David Milch suggested that historically strong language leaning on profanity rather than on vulgarity would have left the characters sounding like Yosemite Sam. However, The Onion thinks blasphemy can be funny to the modern audience. In a recent "This Week In History" video, authors show this as the top of the Sears Tower ...
... which they describe as having been designed to provoke divine intervention still wanting after a middle-finger-clad twin-tower structure was erected in New York.

So, why are vulgarity and profanity interesting to entertainers? Apparently, they are supposed to be shocking. Shocking people gets their attention, and attention is viewership is money. It's probably why a lot of humor aimed at kids depends on fart jokes and insults rather than on clever language: it doesn't require much brains to get, and – and here I tread on thin ice as I don't write in this area – may be easier to write.

When I saw Deadwood with L, we laughed quite a bit about the recurrence of "cocksucker" and "cunt", but the thing that made it interesting was character development and conflict that kept moving through Season One and then seemingly died. Don't bother with anything after Season One. The Onion is pretty funny, though, mostly because if its absurd depiction of a fictional history. The punch line is probably New York's buildings – another intrusion on an American taboo.

Wednesday, May 9, 2012

MTGE's 1Q2012: More Growth

Having Your Cake And Eating It Too At American Capital Mortgage explains how MTGE's 1Q2012 amounts to getting a dividend while the company reinvests a copy of the same dividend. The big question is to what extent – with time and asset growth – MTGE will enjoy the lower costs now enjoyed by AGNC.

Unexpected Sanity at TSA Following Gun Plant

A man attempting to fly to Detroit with his son was surprised that TSA screeners stopped him over his 4-year-old son's stuffed animals. Three stuffed animals had been used to conceal a disassembled .40 cal handgun. After interviewing the man, the TSA reportedly concluded that the incident was the result of a domestic dispute.

Read in plain English, the TSA appear to have believed that the man, picking up his son under a visitation order, had also picked up the firearm planted on the boy to put an early end to the visitation.

Figuring out that the man didn't need to be immediately confined is something this author would previously have suspected to be beyond the capabilities of the TSA. This sentiment is, no doubt, precisely why the handgun was planted on the man by giving it (in pieces) to his son as they left for an airport.

Sometimes, surprise is good. Even in a TSA screening line.
Bad Mickey!

Tuesday, May 8, 2012

American Capital Update

Shortly after American Capital Ltd. announced its quarterly results, so too did American Capital Agency Corp.

The important figure for ACAS – the NAV growth to $15.71 – is discussed in the article Why American Capital Is Buying American Capital. That article rebuts a thin work at The Motley Fool, which pitches ACAS share buybacks as a waste of shareholder funds. Its evidence? ACAS "can't afford" a dividend. Uh, it can afford share buybacks. The only difference is that shareholders aren't taxed on the NAV increases caused by below-NAV share buybacks, whereas they would be taxed on dividends. Were share price above NAV, the same funds would be directed into dividends under the recently continued (through 2013) dividend/buyback policy first announced last year. News the Fool apparently missed.

At American Capital Agency, NAV grew even more than the dividend over the quarter. Share price was more volatile, but that's of more import to traders than to investors. The key for investors is that the dividend remains safe while management reinvests further earnings with the added boost of some hidden tax deferral.

Meanwhile, American Capital Mortgage Investment Corp. announced its 1Q2012 results. As with AGNC, MTGE grew NAV in an amount exceeding the dividend it paid (net of the dividend payment, so it's like getting the dividend and having them reinvest it for you, both). Article to follow :-)

Wednesday, May 2, 2012

Fool Lives Up To Its Name

The Motley Fool once more published that buying shares below NAV was bad for shareholders at American Capital Ltd. Unfortunately, it still hasn't managed to make an even slightly plausible case that management somehow is injuring shareholders through funds mismanagement, when it raises NAV per share by retiring shares at one third below NAV.

A Jaded Consumer rebuttal to the Fool's latest missive is called Why American Capital Is Buying American Capital.

Forrester Says Apple to Decline, But ...

On Seeking Alpha, there's a new Jaded Consumer article responding to the CEO of Forrester Research, who blogged that Apple would decline because it had lost its charismatic leader. His thesis, fully explained in his blog, suggests he's reading the wrong books.

In other news, an old Apple video made for a marketing retreat, featuring Steve Jobs as President Roosevelt, is now available for the entertainment of the masses.