Monday, November 30, 2009

Green Destiny

Destiny Media Year End Results Exceed Guidance. From that release:

Q4 Revenue up 77% Over Prior Year; EBITDA Increases to 266% of Prior Quarter

* Press Release
* Source: Destiny Media Technologies
* On 1:08 am EST, Monday November 30, 2009

* Companies: Destiny Media Technologies Inc

VANCOUVER, British Columbia, Nov. 30 /PRNewswire-FirstCall/ -- Destiny Media Technologies (OTC Bulletin Board: DSNY - News) is pleased to announce results for the quarter and year ended August 31, 2009.

Revenues of $2,560,447 were 62% higher than the prior year and quarterly revenues of $872,569 were 31% higher than the prior quarter. Net income was $610,831 for the company's first profitable year. Earnings before interest, taxes depreciation and amortization (EBITDA) grew to over $300,000 for the quarter ahead of management's preliminary results. The company has had quarter to quarter revenue improvement in eleven out of the twelve most recent quarters and quarter to quarter growth in Play MPE® access revenue in fifteen of the sixteen most recent quarters.

Destiny is also announcing that its board of directors has authorized a program to repurchase up to 1 million shares of the company's common stock at a maximum share purchase price of $0.80 per share. The repurchases will be at times and in amounts as the company deems appropriate and will be made through open market transactions.


Based on preliminary Q1 financial information, Destiny believes it will achieve first quarter fiscal 2010 revenue of at least $1,000,000, representing an increase of at least 14% over the previous quarter and 102% over Q1 fiscal 2008.

Recall that we added more DSNY.OB at $0.305 a couple of weeks ago, noting that we suspected it would trade higher after it released its earnings.

Sunday, November 29, 2009

The higher education bubble personified

The higher education bubble personified.

From Friday's New York Times, Again, Debt Disqualifies Applicant From the Bar. Excerpt:

[A] panel of five New York judges [denied] one would-be lawyer, Robert Bowman, admission to the bar because his debt approached half a million dollars.

“His application demonstrates a course of action amounting to neglect of financial responsibilities with respect to the student loans he has accumulated since 1983,” the judges wrote in a decision issued late last week. They went on to criticize his “dealing with the lenders.”

The decision, which comes as students borrow ever larger sums to cover the cost of higher education, blocked Mr. Bowman’s effort to have his bar application reconsidered after it was initially denied earlier this year. His long struggle to enter the legal profession was the subject of an article in The New York Times in July.

Without practicing law, Mr. Bowman said it would be difficult to earn enough to repay his debts which, because of fees, penalties and interest, were growing by about $10,000 monthly.

“This has destroyed my life,” Mr. Bowman said. “Everything I’ve worked for, every effort, every fight that I’ve taken to make this progress, has been for nothing.”

The photo above, of Mr. Bowman posing alongside his expensive wall decorations, accompanied the previous article about him in the New York Times and was credited to Suzy Allman.

More on short selling and risk

In the comment thread below John Chow's follow up post on Short Screen, a commenter wrote,

If you go long the maximum you can lose is 100% of what you invested. (As I did with my smart investment in Enron!)

If you go short, but the shares rise in value, you then have to purchase them at this higher amount. How much is that higher amount? It is limitless. Thus you are exposed to a massive risk that is unknown at purchase.

Imagine you had decided to short Volkswagen before the massive swing in its share price saw its market capitalization hit $364 billion, making it the most expensive company in the world. Many experienced hedge fund managers were on the wrong side of this trade.

Shares prices do move sharply, particularly those thinly traded and small caps. If you are going short, then you could well be in for a nasty shock.

I recommend The Intelligent Investor by Benjamin Graham (first published in 1949).

In response, I wrote,

Questions about short selling and risk came up in the comment thread following Michael Kwan’s original review of Short Screen. I summarized those questions and addressed them on my blog, if you would like to take a look, “Short selling and risk”.

The Intelligent Investor by Benjamin Graham is an excellent book. I have read it and would recommend it as well. Regarding Graham, you may be interested to know that one his first teaching assistants and proteges, Irving Kahn, is, I believe1, still an active investor at over 100 years of age. Kahn is no stranger to short selling. In fact, an article in Smart Money several years ago noted that one of Kahn’s first big investing successes was with a short:

Along the way, Kahn got to know many of Graham’s famous disciples, including Warren Buffett. A gutsy Kahn wasn’t swept up in what he calls the “crazy market” of the late 1920s. In fact, his first trade in the summer of 1929 actually was a short sale of Magma Copper that turned out to be a winner in a few months.

1Kahn is still listed under the investment personnel section on the Kahn Brothers website, so I assume he is still alive and investing.

Saturday, November 28, 2009

Whatever happened to 'Girl in Your Shirt'?

I read about Girl in Your Shirt a couple of months back on Mark Cuban's blog. An enterprising young woman was recording video clips of elevator pitches like this one below for various businesses:

That video was posted on her site at the end of May, and it appears to be the last one she's done. I e-mailed her via her site a while back to see about doing one of these clips for Short Screen, but never heard back. If she gave this up, another young woman who's comfortable in front of a camera ought to run with the idea, preferably on some sort of CPA basis.

Thursday, November 26, 2009

High-end chef adapts to new economy

Hat tip to Cheryl for this article from about how Craig Shelton, the chef/owner1 of what was once New Jersey's most expensive (and one of its best reviewed2) restaurants, The Ryland Inn, is now working in a diner. About nine years ago occasional commenter Y./TheRivers, who had won a $150-off coupon to the restaurant, treated me to dinner there for my birthday. If memory serves, he ended up paying $350+ out of pocket, even after getting the $150 off -- and we had ordered the less expensive of the two wine pairings offered for the tasting menu. We did get a couple of free cigars from the chef though, when he found out that Y. and him belonged to the same secret society/fraternal organization. From the article,

The Skylark Fine Diner and Lounge on Route 1, with its 60s airport lounge-meets-the-Jetsons interior — flying saucer-shaped lights, retro tables and chairs, and clocks showing the time in Tokyo, Moscow, Paris, London and elsewhere — is one of the more striking diners in a state that boasts more than any other.

But still, a top chef in a Jersey diner? What’s he going to do, offer $25 patty melts?

Far from it.

Shelton, the Skylark’s guest chef, has added dozens of eclectic, globe-spanning, reasonably-priced dishes to the diner’s menu since early September. Constantine Katsifis, the Skylark’s owner, says he and Shelton are "inventing a new category of diner."

"The restaurant business across America is a horror show — down 60 percent, down 40 percent," Shelton said.

The thought of working in a diner makes Shelton laugh heartily.

"But it’s a good idea for any chef ... to have a more diversified portfolio."

After a water line break shut down the Ryland Inn in early 2007, Shelton was working on his high-end coffee line and ideas for food-related TV projects when Katsifis invited him to a restaurant trade show in Chicago.

I remember Shelton's high-end coffee line, from articles about it a couple of years ago. He was offering two types of coffee, actually: one allegedly blended and roasted for enjoyment on yachts and the other for stables. $20 per lb. for each, I believe. Back to the article,

Over dinner, Katsifis outlined a plan for the Skylark that was still evolving in his own mind.

"(There are) 20 chefs as accomplished as he is in the country," Katsifis said. "We came back from that meeting and decided to take the Skylark to the next level."

A commenter on at wrote,

This is a welcome change. The French have bistros, the Italians trattorie and we have - diners.

NJ diners prove that anyone with a deep fryer, a can opener and a griddle can go into the business.

Well, not exactly. The most successful diners have loyal clientele who will only eat mediocre food from their favorite diner's deep fryer.

Edison is a little bit of a haul from here, but we'll have to head down there and check out the new Skylark diner.

1A commenter on writes that Shelton is no longer the owner of the Ryland Inn, having lost it to bankruptcy. I don't know if that's the case or not.

2From that link to the New York Times review:

Did I say words fail me? I seem to have gone on for five paragraphs about a tomato salad -- a dish you probably won't get to eat, by the way, for 9 or 10 months, the season having passed. But this is what it's like to eat at the Ryland Inn. You lose yourself in this food -- its colors, its textures, the way it works with the wine and the way the flavors seem to change and broaden with each mouthful.


Amid such riches it's easy to forget your surroundings. The 200-year-old inn, once a stagecoach stop on the road from New Brunswick to Easton, Pa., is a fine white clapboard building with Gothic touches and a green awning. The garden, open for strolling, occupies 2 of the inn's 50 acres; the rest is rolling pasture shaded by ancient trees. On a clear weekend afternoon in the fall, watching hot-air balloons drift over the forested hills of Hunterdon County, you can imagine yourself in France.

Hunterdon County is old money horse country (unlike hardscrabble Sussex County, where this pony lives).

Monday, November 23, 2009

Covered short of KITD

On October 8th I mentioned that I shorted KITD at $11.55. Today I finished covering it at $10.31 for a slightly better than 10% return. I tried to cover in the $9s a couple of weeks ago for a 15% return, but didn't get a fill - one of the challenges of shorting a low volume stock. Not exactly a home run, but not a bad return for a short position during this increasingly frothy cyclical bull rally.

I may decide to short KITD again, but in the meantime, I'll check the screener and message boards on ShortScreen and look for some more attractive short candidates.

SNL on President Obama's China visit

Hat tip: Kid Dynamite.

Sunday, November 22, 2009

The Half Kelly bet

One of the smartest and most numerate commenters on GuruFocus is the one who goes by the pseudonym "Buffetteer17". Here is Buffetteer17 recently expounding on the merits of a modified version of the Kelly formula for optimally sizing bets or investment positions:

The half Kelly bet has some interesting mathematical properties. For risk management purposes, the nice property is that it cuts your risk of temporary loss (i.e., volatility) by a large amount while reducing your return expectation only a little. The other important property of the half Kelly bet is that it gives a large margin of safety in the risk estimate. If you are off by a factor of two on your risk of loss estimate, a full Kelly bet will reduce your return expectation to zero. But a half Kelly bet will leave you with 2/3 of the return expectation. Not surprisingly, underbetting is far, far safer than overbetting.

With the full Kelly bet, your probability of temporary loss is a linear function of the amount of loss. For example, you stand a 90% chance of losing 10%, an 80% chance of losing 20%, a 50% chance of losing 50%, etc. Not many investors are comfortable with the prospect of a 50% probability of losing 50% of their money. With the half Kelly bet, your probability of temporary loss is a quadratic function of the amount of loss. For example, you stand a 81% chance of losing 10%, a 64% chance of losing 20%, a 25% chance of losing 50%, etc.

Your expected gain with the half Kelly bet is reduced by 25%. For example, if your expected gain is 40% with the full Kelly, it is 30% with the half Kelly, if your expected gain is 30% with the full Kelly, it is 22.5% with the half Kelly, and if your expected gain is 10% with the full Kelly, it is 7.5% with the half Kelly.

The quarter Kelly bet is even safer. You cut your volatility by a quartic factor while reducing your return expectation by half. For example, you stand only a 6.25% of losing half your money. If you can find enough uncorrelated bets to get all your money invested, you can still invest 100% of your stake with a high safety factor with multiple quarter Kelly bets. The rub, of course, is that it is hard to find truly uncorrelated bets during a market crash like 2008.

In his brief book The Dhando Investor, Buffett wannabe Mohnish Pabrai devoted a chapter to the Kelly formula before concluding that, rather than follow it exactly, he was motivated by it to aim for a 10x10 portfolio (ten positions each comprising 10% of his portfolio). According to notes on his annual investor meeting earlier this year, Pabrai has moved further away from the Kelly formula, to a 3-5-10 set up, where he will only allocate 3% or 5% to most positions, and only occasionally allocate 10% to one idea under extraordinary circumstances.

A problem I have with this gets to a key difference between investing in stocks and betting. Stocks have their own idiosyncratic risks and potential upsides, and the more of them you own, generally, the less informed you will be about them. Better to dig deep and bet big on a handful of stocks with high upside potential, in my opinion, than to broadly diversify as Pabrai is doing. Even broadly diversified index investors got their heads handed to them last year. Idiosyncratic risks aren't the only ones out there, and in over-diversifying to eliminate them, you also diversify away the idiosyncratic high potential returns associated with individual stocks.

Saturday, November 21, 2009

Mandelbrot Set, animated

I've mentioned Jonathan Coulton's song Mandelbrot Set here a couple of times before, but I just found this video for it animated by a self-described "math dude" at Cornell. For any math geniuses reading this, be sure to listen to what Coulton says over the credits.

Friday, November 20, 2009

And a pony

Video of a young pony (I think it's a year and half old) having a snack. Cheryl took this last Sunday. If anyone is interested in diversifying into ponies, I think this one is for sale.

Did political correctness facilitate the Fort Hood massacre?

The Atlantic's Ta-Nehisi Coates isn't sure. Neither are most of his commenters. In about an hour of my life I won't get back, I took a slightly different view in the comments there.

A neglected asset class?

In an exchange with Aaron Edelheit on his blog earlier this week (in the comment thread of this post of his, "Why are you sitting in cash?"), I pointed out that, even if one were bearish on the U.S. dollar, it might not make sense to diversify out of it now if one believes that the stock market is overvalued. That's because, if history is a guide, the dollar will rally (at least temporarily) when the stock market corrects. At that point, after the dollar rally, it might make more sense to diversify into non dollar-denominated assets.

Richard Bernstein made a similar point in his column in yesterday's Financial Times ("Lessons of investing are ignored"), noting the negative correlation of U.S. Treasuries to stocks and other asset classes:

Investors should be trying to emulate their Chinese and Japanese overweight positions in Treasuries. Instead, Wall Street is striving to get the Chinese and Japanese to “diversify” like everyone else. In my opinion, the Chinese and Japanese should ignore the advice and stick with their Treasuries.


Treasuries are today’s “alternative” asset class. Treasuries’ returns continue to be negatively correlated to equities, yet they remain widely underowned because investors consider them overly risky.

Update: Yahoo! Finance's current headline: "Stocks fall for 3rd day as dollar strengthens".

Thursday, November 19, 2009

Added Destiny

Picked up some more Destiny Media (OTC BB: DSNY.OB) shares at $0.305 today. I suspect they will be trading higher after the company releases its earnings later this month. We'll see.

Wednesday, November 18, 2009

New Mexico soccer brawler speaks

Yahoo! Sports reports that Elizabeth Lambert, star of the clip in this post, "Girl's soccer gets rough", was interviewed by the New York Times about her exploits during that game against BYU: Vilified New Mexico soccer player breaks her silence. Excerpt:

The junior was deluged with calls and letters after the video went viral. Some of those were threats, but others came from men who wanted to ask her out. She was disgusted by both.

The screen cap above, of Lampert drilling a BYU player in the back, accompanied the Yahoo! article. If memory serves though, that shot at least was in retaliation for an elbow strike. That video featured more blatant stuff by Lambert than that.

For value investors and online entrepreneurs

A couple of new products profiled by TechCrunch may be of interest.

For value investors, particularly the ones who enjoy investing in big companies everyone already knows about: Trefis might be of interest as a GUI way of playing around with discounted cash flow estimates.

For online entrepreneurs who want a more professional way to accept payments than PayPal and don't want to deal with the hassle of setting up the gateway, payment processor, security certificate, etc. from scratch (as my developers did with Recurly (currently in "private beta"). I didn't look at all of the comments in that thread, but a couple of commenters mentioned a competitor to Recurly that's already live, Spreedly.

Tuesday, November 17, 2009

Never seen a football play like this

Via Yahoo! Sports. Amazing:

Business is business

This was a pleasant surprise. Fred Wilson's resident bouncer, conspiracy theorist, and occasional target of my disapproving comments Kid Mercury signs on as an affiliate of Welcome aboard, Kid.

Bakken Black

U.S. Energy Corp. Announces Initial Production Rate of Approximately 1,544 BOE/D From the Lee 16-21 #1H Bakken Well.

I believe that's three-for-three so far on USEG's Bakken deal.

Incidentally, one thing you notice using ShortScreen is that a number of natural resources companies appear on its screener, including BEXP, USEG's Bakken partner. Indeed, when you consider the generous terms USEG got on this deal, it's not too surprising when you consider both companies' respective Altman Z"-Scores: USEG's score was in the financial strength zone and BEXP's was in the distress zone. Not surprising that USEG would get good terms on its deal given that it was negotiating from a position of financial strength.

Monday, November 16, 2009

Rethinking Belichick's call last night.

For those who didn't catch the end of the Colts-Patriots game last night, here's the recap from Yahoo! Sports:

Needing a first down to seal the game, Belichick decided to go for it on fourth-and-2 from his own 28 with 2:08 to go. The Patriots called their second timeout of the drive, leaving them with none, to set up the play: A short pass from Brady to Kevin Faulk(notes), something the 2007 NFL MVP had repeatedly used to burn Indy’s young, depleted pass defense all night.

Not this time.

Faulk made a juggling catch but safety Melvin Bullitt(notes), who replaced Bob Sanders(notes) in the lineup, came straight up the field and drove the Patriots running back into the ground a half-yard short of the marker.


The miss gave Manning 1 minute, 57 seconds and all three timeouts—an eternity for the three-time MVP—and he went right to work.

Manning hooked up with Wayne for 14 yards. He let Joseph Addai(notes) carry the ball for 13 yards, down to the Patriots 1. He sent Addai inside again on first-and-goal, the same play Addai scored on to win the 2006 AFC Championship game, but he got nothing. So Manning went back to Wayne in the end for the win.

The Pats got the ball back on the kickoff after that last TD with something like 9 seconds left, and the clock promptly ran out after one in-bounds completion by Brady.

After the game, play-by-play guy Al Michaels asked a couple of analysts about Belichick's decision -- former Colts coach Tony Dungy and someone else, whose name I forget. Both agreed that Belichick made a bad call, not punting on 4th & 2 from his own 28. I thought so too, at first, but re-thinking it, I think Belichick made the right call given the amount of time left in the game (just over 2 minutes). He probably figured that, if the Pats didn't convert, the Colts would likely score a TD -- but starting from his ~28 yard line, they'd score it quickly, leaving plenty of time for the Pats to get into range for a game winning field goal afterwords. And that's probably what would have happened had Pats defenders not stopped Colts RB Joseph Addai at the 1 yard line on his 13 yard run.

Saturday, November 14, 2009

Advice, and a request

If you register a domain name because you plan to build a website with that domain name later, something to watch out for: if you plan to host your site elsewhere, but your domain registrar parks your domain on a "coming soon" page first, it can impede your search engine optimization later. That appears to be the case with, which is taking some time to get indexed by search engines (this has also held up Google Adwords/Microsoft adCenter keyword ads). If you have your own site, and wouldn't mind posting a link to ShortScreen ( ) in a post there, I'd be grateful, as my developers tell me that will help with the search engine indexing. Thanks a lot.

To head this issue off for the next site (which is currently in development), my developers moved the domain from the registrar early, and put up a quick one page site for the domain hosted on their servers.

Friday, November 13, 2009

Covered short of a David Einhorn stock for 27% profit in less than two months.

On September 17th, I mentioned that I had shorted one of David Einhorn's holdings, Einstein Noah Restaurant Group (Nasdaq: BAGL), at $13.78. I found BAGL initially using ShortScreen's screener: at the time, it was one of the 50 most-distressed stocks trading at $10 or above. Earlier today I covered my short position at $10.05, for a 27% profit in less than two months.

If you had followed me on this particular trade but shorted only 100 shares, your capital gain would have paid for an annual membership to ShortScreen more than twice over.

Time to retire the football helmet?

Old friend and new reader of this blog (if he's still reading it) Y./TheRivers e-mailed me this WSJ story a few days ago, "Is It Time to Retire the Football Helmet?". He sent it to me because he remembers that I was awarded a worthless patent (the CAD image above is from the patent) years ago for a football helmet-related invention. From the article:

"Some people have advocated for years to take the helmet off, take the face mask off. That'll change the game dramatically," says Fred Mueller, a University of North Carolina professor who studies head injuries. "Maybe that's better than brain damage."

Mueller's right that this is an old idea. 15 years ago I wrote a paper about my invention where I mentioned some expert (it might even have been Mueller, I don't remember) advocating removing the face mask. I do remember that whoever this expert was advocated teams doing so unilaterally, and for coaches to tell their players that this way they'd have a greater field of vision (in my paper, I suggested that those who took this unilateral tack would come to grief and they would be better off using my invention).

I mentioned to Y. via e-mail that I believe there have been for years rubber shields that can be worn over the top of current helmets and that these shields reduce the impact from collisions by, if memory serves, 40%. Why they aren't worn more often, I don't know.

What Jeffrey Sachs doesn't get

I'm a couple days late to this, but Columbia's Jeffrey Sachs went one-for-three in his recommendations in his Financial Times op/ed Wednesday ("Obama has lost his way on jobs"). He also made a pretty glaring omission. From his essay,

The past week brought news of US double-digit unemployment and the Federal Reserve’s decision to maintain near-zero interest rates. Both pieces of news expose the inadequacy of US economic policymaking. The Obama administration’s stimulus policies are not well-targeted.


During the previous bubble, the US consumer was encouraged to over-borrow. Recreating a new bubble is like offering just one more drink, on the government’s account, to overcome a mass hangover. With budget deficits of about 10 per cent of gross domestic product, government spending needs to be far more consequential than temporary boosts to consumer spending.

The Republican alternative is equally fatuous. For every problem there is a single Republican answer: tax cuts.

OK, so far so good, though it's worth noting that Sachs's characterization of Republicans doesn't apply to all (e.g., Bruce Bartlett).

Sachs goes on to recommend a three part solution:

1) An increased emphasis on exports and infrastructure (makes sense).

2) " " Education (doesn't make sense).

3) " " Green energy (doesn't make sense, except, perhaps if it's limited to nuclear which many environmentalists don't consider to be green. Spain, the world leader in wind power, had 19.3% unemployment as of October).

On education, Sachs writes,

The unemployment rate among college graduates is only 4.7 per cent, while it is 15.5 per cent among those without a high-school diploma. The US woefully under-invests in education outlays for the poor, who drop out of school and then cannot find gainful employment.

First, I'm not sure what Sachs is talking about with respect to under-investment. We spend plenty on education -- 7% of GDP, versus 4% for defense. We spend more per student on primary and secondary education than Japan does.

Second, this is the kind of thing I guess someone might write if he had never gone to public schools growing up and were ensconced in a sinecure at Columbia University. It must make perfect sense from Sachs's perspective: unemployment rates are lower for college grads, so let's just turn those high school dropouts into college grads. It probably has never occurred to Jeffrey Sachs that most high school dropouts dropped out because they didn't have the aptitude for college prep work in high school, let alone college itself.

Sachs seems unaware of the higher education bubble (As Sheila Tone noted recently at Hit Coffee, even last week's Florida shooter had been a participant in it).

Now for Sachs's glaring omission:

The president has lost the economic initiative, weighed down by a tedious fight between two outmoded ideologies: Keynesianism and supply-side tax cuts, as well as by the president’s excessive deference to Congress.

Can you think of another domestic policy initiative that has preoccupied the President this year (Hint: it rhymes with "stealth care")? I suspect Sachs knows that, as Tsinghua University Professor Yu Qiao warned back in April, the administration's emphasis on social spending could "delay sustainable recovery". But he probably is in favor of the Democrats' proposed health care reform and figures that, politically, this is their best chance to enact it, even if it's the wrong priority economically. Hence, Sachs's omission.

The sirens call a sailor to die

The backbone of America

"So, what's your favorite Cult album," the guy standing to my right asked. We were waiting for the concert to start at the Wellmont in Montclair, NJ Tuesday night. I told him it was between the album the band is playing in its entirety on this tour, 1985's Love1, or Sonic Temple. "I like them all" he said. A hardcore fan. "Do you have the white boxed set?" I confessed I had never heard of it. "The black boxed set?" Ditto. And so on for a few minutes.

I introduced him to Cheryl who wasn't sure what her favorite Cult album was, and he said his name was Chris. He said he was a sales rep for Otis Spunkmeyer, up from Orlando on a business trip he scheduled around the concert (he said he was going to see the band again in Orlando this weekend with his wife). "I spread happiness and joy," he said. "I sell cookies and baked goods. The cookies in Subway restaurants? That's us. If you've ever had a muffin in a Hampton Inn, that was ours too." If you've ever stayed at a Hampton Inn, you've also seen guys like Chris there, men who make the American economy move.

The last fan

On the way to the show we had parked on some residential street and ended up having to walk a half mile or so detour2 to the theater, so after the concert, we stood outside for a moment trying to orient ourselves. A small crowd had formed, waiting for the band to emerge. We figured we'd stay around for a few minutes and watch. The roadies or the theater staff fenced us in with bicycle racks on two sides so no one would get in the way of the equipment being loaded up. After a few minutes, the back up guitarist and the bassist walked out, signed a few autographs and posed for a few photos. Then the fierce and precise drummer John Tempesta came out. He looked a lot smaller in person than he did glazed in sweat, pounding away behind the drum kit. He posed for a few photos too with a couple of fans, and I shook his hand and complimented him on his performance. Then he walked off into the Montclair night with some young lady about half a head taller than him.

That left two tour buses for the core of the band, lead singer Ian Astbury and lead guitarist Billy Duffy. Cheryl quipped that one bus was for Astbury's ego. The little crowd started to thin out when Astbury and Duffy didn't appear after a few minutes. At that point I started to wonder who would be the last fan waiting around on a Tuesday night. The guy who broke out his leather pants and jacket for the show? The little gaggle of Eastern European guys, one of whom had a sheet with all the songs on the Love album taped to his shirt? I had to go to the bathroom by that point, so we didn't stick around to find out.

1This one sounds much better live, incidentally. I suspect that the band will take the best versions of each of the songs on it from the concerts on this tour and release a 25th anniversary live version of it next year. That I would buy. The title of this post comes from the lyrics to the last song on the album, btw.

2We walked past some pottery cafe and Cheryl asked, "Why can't we have something like that in Hackensack?" "We have more diversity than Montclair," I said, by way of consolation. "I'd rather have a pottery cafe," she said.

Ill-equipped to act, with insufficient tact

This didn't last long. On the advice of one of my developers I deviated from the personalized tweeting and sent the same reply to 20 or so folks on Twitter yesterday. I searched for people tweeting about short selling and then suggested they might want to check out shortscreen for other short ideas. In fairness to my developer, he didn't suggest to do that, exactly: he suggested to tweet a handful of folks at once. In any case, my Twitter account has been suspended, which frankly surprised me.

Judging from 100% of the tweets I received from 30 individuals over my few days-long Twitter career, my tweets were better targeted and more relevant than pretty much any of them. For example, unlike the fellow who managed to send me -- someone hasn't golfed in maybe four years and has a set of Costco clubs gathering dust somewhere -- 20 links to golf tips in two days, I only contacted actual short sellers about a site geared to short selling. That's not to suggest that all of the tweets I received in the last few days were commercial in nature: some were just inane bits of trivia, e.g., the one from a woman in the Southwest who mentioned that she had moved that day and asked if anyone else liked moving.

I appealed for clemency to the powers that tweet, noting that after reading the TOS I understood my mistake. The form for contacting Twitter about stuff like this includes a field asking "how do you feel"1. I entered "chastened". But I am of two minds about this. On the one hand, the ratio of visits to Shortscreen from Twitter to my tweets was pretty high -- about 50%. On the other hand, the whole Twitter enterprise seems like a pointless time suck. So I leave it to the folks at Twitter to decide if my tweeting days are over. If they are, so be it.

1This question reminded me a little of that test the reincarnated Spock takes at his parents' house on Vulcan in Star Trek IV. He gets a series of questions, one of which goes like this, if memory serves, "Adjust the sine wave of the magnetic envelope so that anti-gravitons can enter and anti-protons cannot". And then he is stumped by the last question, "How do you feel?".

Thursday, November 12, 2009

Alloy Steel expands into Indonesia

Special message from our sponsor to visitors from iHub:

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You may remember that the Altman scores accurately predicted both AYSI's survival and VBDG's demise

Alloy Steel International (OTC BB: AYSI.OB) filed this 8-K today:

Quantum Leap for New Super Alloy

High demand for new Super Alloy Arcoplate products has prompted Alloy Steel International to expand their operations into Indonesia by the appointment of a company to carry out functions on its behalf and under its direction.

The first overseas engineering office, based in Jakarta, will house both marketing staff and engineering professionals.

The Indonesian capital was chosen as the hub of operations due to its proximity to the expanding South-east Asian market, the lower manufacturing costs and the availability of highly qualified technical staff.

Possible sites for the manufacturing facility are undergoing analysis regarding capital costs of construction and fit out.

The Arcoplate Super Alloy, released in July this year, can be manufactured thinner thus lighter and more durable than older white iron type products. A one inch Arcoplate Super Alloy plate can replace white iron products up to six inches thick. Successful laboratory tests and field trials have shown cost and energy savings by reducing friction, greater ease of handling, and less production shutdown time for plate replacements.

Mining clientele have indicated they will specify Arcoplate in their plant expansions, upgrades and in new mining and mineral processing applications worldwide. The new thicker sizes are in heavy demand worldwide.

The new Indonesian branch of Alloy Steel International will cater for clients extending their mining operations into Indonesia and will allow for further expansion into the Chinese, Indian and Mongolian markets.

Alloy Steel International Chairman, Mr Gene Kostecki, estimates that once the company has the facility to service the Indonesian market from a local base, demand for Arcoplate in Indonesia could exceed $10 million per annum.

There was some question on Alloy Steel's i-Hub message board about whether this is a licensing deal or not. I suspect it isn't, but I sent an e-mail to the CEO asking if he could clarify. If I hear back from him, I'll update this post accordingly.

Update: Alloy Steel International's CEO Gene Kostecki responded via e-mail saying that this was not a licensing deal. He said the company was avoiding those out of concerns about protecting its intellectual property, which he said was the company's highest priority. He said that this expansion would enable AYSI to take advantage of Indonesia's lower labor costs and proximity to markets in China and India. If I get his permission to do so, I will quote his e-mail verbatim here, but those were the key points.

Second Update: I have his permission, so here's his e-mail:

Dear David:

We are all very excited with our expansion program into South East Asia as it will give the company a great stepping stone into the entire ASEAN Market which is one of the fastest growing economies in the world.

The new government in Indonesia is fast tracking all economic development and investment in Indonesia. With Indonesia’s low labour costs and proximity to China and India it will place the company in a very competitive position to capitalize on Asian markets in this part of the world without sacrificing quality and margins, yet still being price competitive against low end products that portray themselves as wear plate.

David, we do not see the need to enter into any licensing agreements with any third party as this could potentially compromise our position in protecting our intellectual property rights in this part of the world. Protecting our intellectual property rights is the company's top priority.


Gene Kostecki

Wednesday, November 11, 2009

A charitable giving idea for Veteran's Day

There are a number of charities dedicated toward helping recent veterans of Iraq and Afghanistan, but less attention paid to the elderly veterans of past wars. This article from the Record represents a noteworthy except. Maybe some of you in other parts of the country will be inspired by it: Donations pour in to support veterans' home happy hour.

The photo above accompanied the article and was credited to Record staff photographer Chris Pedota.

Short selling and risk

At the suggestion of my developers, I requested a review of Shortscreen by John Chow's site. You have to pay to have your site reviewed by John Chow, but he and his team are free to write whatever they want about it: they have complete editorial control. The review is up now; you can read it here: Screening Stocks for Short Selling.

A couple of the commenters raised reasonable questions about the risks of shorting. I addressed those questions in the comment thread there, but it's worth recapping here too.

Question/comment: Additionally, short selling as a whole is risky because you can lose an unlimited amount of money because a stock can go up an unlimited amount theoretically.

Answer: There is a way to limit your downside, if you want to bet against stocks: you can buy puts on them instead of shorting them. As with shorting, you’ll profit if the stock drops, but in the case of buying puts, your maximum loss is limited to what you paid for the put. You can use Shortscreen to screen for candidates to buy puts on as well as to short.

I personally don’t limit myself to buying puts, because I believe there are often better short selling candidates among stocks that aren’t big enough to have options traded on them. There is of course a risk that I will lose money on some trades, but by limiting myself to shorting stocks that a highly accurate model predicts are headed for bankruptcy, I believe the odds are on my side.

Question/comment: Selling stocks short is a good way to also LOSE A LOT of money.

Answer: Although there are risks involved in short selling, it’s important to note, as a previous commenter alluded to above, that, for knowledgeable investors, adding short selling (or buying puts) can reduce the overall risk of your portfolio.

For example, although it is risky to own (i.e., to be long) one stock in a particular industry, and it is risky to short one stock in the same industry, it may be less risky to do both at the same time. As Investopedia notes, this strategy, called a pairs trade, is often used by professional investors to hedge against sector and overall market risk.

For more on this general concept, see, for example, this essay by Ken Hawkins: Make Your Portfolio Safer With Risky Investments.

Tuesday, November 10, 2009

Insomnia and social media

Couldn't sleep last night, so I signed onto Twitter. Yeah, I remember what I said about it here, but my developers suggested I use it to help get the word out about So I searched for phrases related to short-selling, and then looked up the profile or blog of the senders for the individual's name and other details. Then I sent them a personalized tweet inviting them to check out the site.

The funny thing about Twitter is that this sort of unsolicited contact gets an entirely different reception than it would if it were e-mail. People start to "follow" you, (i.e., sign on to receive your tweets; apparently, you have to immediately follow them back, otherwise they may feel hurt and un-follow you). I guess everyone wants to have a large number of followers and pretend those folks are actually reading their tweets.

Ft. Hood

I've avoided writing about this here so far, though one comment I've made elsewhere is that the U.S. Army's policy of keeping most of its troops unarmed stateside isn't a new one. Back when I was in the Army Reserve, in the run-up to the first Gulf War, there were worries about terrorist/irregular attacks here in the U.S. We had someone from the Army's CID lecture us about being vigilant, and the Army Reserve Center started posting reservists at the main entrance, but our rifles remained locked away in an arms room in the basement.

Even so, if someone had tried to do what Maj. Hassan did in Texas last week at my unit, he would have been stopped a lot quicker: about half of the guys in the brigade were cops (mainly NYPD, plus some state troopers, sheriff's deputies, local cops, and assorted others), and most brought their police weapons to drills.

I was reminded of that a few minutes ago by seeing the photo above on Yahoo!. I wonder if the rifles set up as part of the memorial for those Ft. Hood soldiers might have felt like rubbing salt in the wound for some of the survivors and relatives of the victims. If the troops had rifles when Maj. Hassan started shooting, certainly a lot fewer of them would have gotten shot and killed.

Girls soccer gets rough

Watch what happens at 1:04. HT: Trumwill @ Hit Coffee.

I mentioned this over there, but one of the players mentioned in the voice over (I think the one who got yanked down by her pony tail) was named Shumway. There’s a noted finance professor whose work I came across in doing research for Shortscreen named Tyler Shumway. Maybe that name is more common out west.

A Cat Post

Since I had the $20 digital camera with me on Saturday, and Cheryl hadn't seen her cats in couple of weeks, I snapped a few shots of them. Since a cat site is ranked among the top 800 websites in America according to Alexa, I figure it can't hurt to post the pics here.

The first two pics are of the blue gray male cat, Buster Catlett1 Johnson. His pics didn't come out too well, partly because he wouldn't sit still and partly because I was using a $20 camera. This cat happens to be blind. Unlike some non-blind human actors who ham up their characters' blindness (e.g., the actor2 who played Jody Foster's character's blind friend in Contact), it's not immediately obvious that Buster is blind. He "looks" at you if you address him, and he navigates pretty well, including walking up and down stairs. Apparently, he has memorized the layout of my mother's place. Oddly, there's not even a false step when he gets to the top or bottom of the stairs; it's almost as if he knows how many steps there were. Also, his eyes appear fairly healthy and normal (though if you look closely, you notice his pupils are a little dilated).

Incidentally, some woman recently got a book published about her blind cat, but her cat looks pretty dreadful (it was born with no eyes and had them sewn up). She also targeted her book to adults. I think a book about a blind cat would work better as a children's book. I just need to find an illustrator and some time and I'll be in business.

This photo is of the female cat, Buster's sister Polly. This came out better because she was at eye level on a cat condo, and perched up there, was less inclined to move around. She isn't blind. The only thing that she can do that Buster can't do in terms of moving around is that she can jump. Buster gets to the same places by climbing.

1That middle name, "Catlett" is a new addition. I had Cheryl read this exchange from a comment thread on Fred Wilson's blog between me and a fellow who "would give an appendage on the left side" of his body to have ever met "George Catlett Marshall". I never knew that was George Marshall's middle name. Cheryl decided it would make a good middle name for a cat.

2William Fichtner, same actor who played Van Zant in Heat:

Neil McCauley: What am I doing? I'm talking to an empty telephone.

Van Zant: I don't understand.

Neil McCauley:
'Cause there is a dead man on the other end of this fuckin' line

Monday, November 9, 2009

What's with the music at Starbucks?

Sitting in one now doing some work on the new site, and they are playing something that sounds like Celtic Woman on suicide watch.

Sunday, November 8, 2009

TV viewing tip for West Coast viewers

Seth and Alex's Almost Live Comedy Show was pretty funny. Below, via Fox's YouTube channel, is Jackson Douglas, Alex Borstein's husband, and director of some sequences, on the show:

Jackson Douglas also played a character called Jackson on The Gilmore Girls. Cheryl informs of this bit of trivia: the character who ends up marrying Jackson on that show (Sukie something -- she was a loudmouthed chef and Jackson was her produce guy) was originally going to be played by Alex Borstein, but Borstein couldn't get out of her Mad TV contract.


Hit that minor milestone on the road to my mother's small horse farm out in the country yesterday morning. Since Cheryl's digital camera has been sitting broken in my trunk for the year or so while I've been procrastinating about getting it fixed (or buying a new one), I took the photo above with a $20 digital camera I picked up at the drug story before I hit the road.

Ten years ago, I won a digital camera in some sales contest. Actually, it was a voucher for a $350 camera, but I paid another couple hundred dollars out of pocket to upgrade to a Sony Mavica, which saved photos on a 3.5 inch floppy. New reader and old friend TheRivers/Y. remembers what that dinosaur looked like. I still have it, I'm pretty sure.

Friday, November 6, 2009

Logo for new blog: thoughts?

This is a draft of the logo for one of the new blogs that's going to replace The Hackensack -- this is where I'm planning to migrate my posts on obscure stocks. The domain name -- "Shadow Stocks" -- connotes their obscurity: the blog will continue to shed some light on a handful of little-followed companies such as Alloy Steel International. My concept for the logo was Sherlock Holmes as a bull. I like the execution of it, but have one minor issue with it. Let me know what you think. I'm interested in seeing if anyone raises the same concern.


Thursday, November 5, 2009

Cognitive Dissonance

Another blog had a post yesterday on the election results, which generated a vigorous and wide-ranging discussion in its comment thread. One of the commenters, a successful border state businessman, whom I know to be intelligent from his previous comments, lamented his high tax burden while essentially expressing support for unskilled immigration to deal with "scarce labor" in the U.S. Surprised that he hadn't connected the dots from the one issue to the other, I left him this comment in response:

If memory serves, elsewhere in this thread you were complaining about your tax burden. Here you seem fairly sanguine about the importation of unskilled immigrants, who, research shows, tend to consume more in government resources than they pay in taxes. Further, when they become amnestied (or when their American-born kids turn 18) they will vote to increase your tax burden -- you know most of them aren't going to be joining the Club for Growth, right? There seems to be some cognitive dissonance at work here.


Took advantage of the up day today to pick up a few more DIA puts. I'm working on a more precise hedging strategy, but these should suffice in the meantime. Hedging plus shorting)
so I'm not swimming naked when the tide goes out.

Looking for a wealth advisor/RIA position in NYC?

Passing this along from a recruiter. If anyone reading this is interested, e-mail me and I'll connect you with him:

Investment Management firm with twenty year track record running a respected hedge fund strategy is transitioning to become a fee‐only wealth management firm/family office for medical professionals – the firm is looking to bring on an experienced professional to serve as financial planner and primary wealth advisor for existing and new clients of the firm.


5+ years of financial planning experience required

Series 65 license and CFP/PFS/similar accreditation required

Transferrable AUM of $20M+ required

CPA license and law degree preferred, but not required

Wednesday, November 4, 2009

Warren Buffett versus Pranab Mukherjee

Interesting juxtaposition on the front page of today's Financial Times: The paper leads with Berkshire's $27 billion buyout offer for the ~77% of Burlington Northern Santa Fe, and highlights this quote by Buffett:

It's an all-in wager on the future of the U.S.

That makes the bet seem a little riskier than it is, I think. The bet seems fairly agnostic about, say, the future of American manufacturing or exports. The railroad will make money shipping imports in from the ports or exports out to them. In any case, here's what the FT had below the fold: news that India sold dollars to buy 200 tons of gold. Excerpt:

Pranab Mukherjee, India's finance minister, said the acquisition reflected the power of an economy that laid claim to the fifth-largest global foreign reserves: "We have money to buy gold. We have enough foreign exchange reserves."

He contrasted India's strength with weakness elsewhere: "Europe collapsed and North America collapsed"

Tuesday, November 3, 2009


Would have blogged about this earlier, but I got a late start today and was on the go. Shares of U.S. Energy Corp. (Nasdaq: USEG) were up 21.68% today, mainly on the announcement of positive results at the second of its Bakken wells:

U.S. Energy Corp. Announces Initial Production Rate of Approximately 1,776 BOE/D From the BCD Farms 16-21 #1H Bakken Well.

Also, the Wall Street Journal reported Monday that "market talk" suggested that Standard Steam Trust planned to raise a minimum of C$50 million in an IPO. Recall that USEG purchased 25% of the privately-held geothermal company for about $3.5 million at the end of last year. Recall also USEG CEO Keith Larsen's comments to us about Standard Steam back in August:

Keith Larsen predicted that USEG's investment in Standard Steam Trust would be a ten-bagger within two years. He noted the advantages of Geothermal versus other alternatives such as solar and wind (Geothermal's always on, so it doesn't need a back up power source), and mentioned that a Canadian geothermal company, Magma Energy recently raised over $100 million in an IPO.

Christie FTW

Former Goldman chief Jon Corzine loses despite outspending former U.S. Attorney Chris Christie by $12 million: Republican Christie captures NJ governor's seat.

The Atlantic's Marc Ambinder writes,

The Republican wins in New Jersey and Virginia and the close race in New York City tells us...
...self-financers, people affiliated with Big Wall Street, the Old Money Crowd, the establishment, the party leadership... are being put on notice. Not a Democratic or Republican thing...but a gun, fired by the political regulars -- not the newer Obama turnout cohort but the regular off-year cohort -- at the heart of those who protect those in power, at bailouts, at spending.

Also: very easy alternate explanation: the economy sucks. States are really hurting. Governors are very unpopular. Their support is going to crater.

Monday, November 2, 2009

Because pointing and walking is epic

Hat tip to Hit Coffee for this clever commercial for a business that sells refurbished mobile homes:

And hat tip for the Hackensack for digging deep to find this video of the making of that commercial:

I may have to hire these guys to make a commercial for

Sunday, November 1, 2009

New site

If you're new here, please take a moment to read the post below, which is a message from our sponsor.

A few of you have already seen the demo version of this site, but the live version of it is up now: This site features an automated calculator and a screener based on the Altman models. With the calculator, all you need to do is enter a stock symbol, and the calculator will instantly give you that company's Altman Z-score, or Altman Z"-score, if it's a non-manufacturing company.

The screener runs the Altman Z-Score model on all of the manufacturing stocks in the site's database, and the Altman Z"-Score on all the non-manufacturing stocks. You can pick a minimum share price and then see a list of the 50 most distressed stocks at or above that share price, out of the universe of roughly 3,000 stocks in the site's database. You'll find a couple of the short positions I've mentioned previously on this blog among the 50 most distressed stocks at or above $9 per share.

If, like me, you think it's prudent to include some short positions in your portfolio, perhaps you will agree that a list of stocks that the Altman models predict are headed for bankruptcy might be worth considering as potential candidates for short selling (or buying puts on them, if the particular stocks have options).

The site also has a message board system with a couple of unique features. The first is that, unlike other stock message boards, there will be no bias against skeptical or bearish comments. If you've ever posted one of those on a typical message board, you probably noticed that it quickly got deleted. That makes it tough to find a balanced discussion about any stocks.

The other unique feature is the premium ranking system. Premium members will have the authority to rank comments on a scale from one to five stars. Comments that have an average rank of less than two stars after several votes will be deleted, and the highest-ranked comments will move to the top. Although non-paying registered users and paying premium members will both be able to post on the message boards, the site limits the ranking authority to premium members to discourage anyone from creating multiple accounts in order to manipulate the ranking system (which is pretty common, unfortunately, on Yahoo's message boards).

Premium members will also have the opportunity to become affiliates, and get paid to refer other premium members to the site. When you become an affiliate, you'll get a unique bit of HTML code for an affiliate badge that you can copy and paste onto your site. When you do, it will look like this:

When visitors click on your affiliate badge, they'll go to a special version of the Shortscreen sign-up page where they will get a 5% discount off of the regular membership rate, and your affiliate account will be credited with the referral.

The image above was one of the later preliminary sketches by my logo designer. At that point we were refining the steepness of the hump of the bear's withers. I wanted it to be steep to connote aggression, but when it got too steep it looked too wolf-like.

Can't do housegirls

Eliot Spitzer is the subject of this weekend's Lunch with the FT. In it, FT interviewer (and Spitzer biographer) Brooke Masters writes,

But the spectre of Ashley Dupré, the 22-year-old prostitute who became Spitzer’s downfall, hangs over the conversation. At one point we are comparing notes on skiing, and I make a pitch for how nice it was to have a catered chalet with what I refer to as a “houseboy or housegirl” to cook all the meals.

“Housegirls I can’t do,” he says bluntly.

From foursquare to FIVEsquare

In a recent post ("Blogging like it's 1999") we mentioned Fred Wilson's portfolio company Foursquare. One of Fred's regular commenters, entrepreneur and investor Andy Swan, also mentioned it on his blog. This was his take (Introducing FIVEsquare):

By now you’ve probably heard of foursquare, the mobile internet sensation that has everyone talking, and VC’s opening their checkbooks.

But just like 7 minute abs and 6 hour power crushed their competition, we are here today to bring an even more effective product to the world.

Introducing, FIVEsquare…. the “mobile meets local” web pi app of the future. It is to local-mobile-apps what dippin’ dots is to ice cream, if you catch my drift.

So how does FIVEsquare work?

Because FIVEsquare is common-sense based, it requires no download, no install and no login. There are several ways to make FIVEsquare work for you:

One to One communication: When you want to know where a friend is on FIVEsquare, you simply pull your phone out of your pocket and either dial their phone number (VOICEsquare), or send them a SMS message (TEXTsquare) with the following message “Hey, where are you?” Unlike foursquare, if you are leaving where you are at and going somewhere else, you can tell your friend where you are going, and what time you can meet there (PREDICTsquare)

One-to-Many Location notification: Let’s say you want to tell all of your friends where you’re at or where you’re going. With FIVEsquare, you simply send out a message on twitter (TWITsquare) something like this “I’m going to the saloon around 7:00 if anyone wants to meet up!”. Let FIVEsquare do the rest. Before you know it, individual friends will be meeting you places or using VOICEsquare to get more details and let you know where they are going!

Friend Nearby Alerts: FIVEsquare utilizes “visual recognition technology” to alert you whenever your friend is in the same location as you. To utilize this service (SEEsquare), simply put your phone into your pocket when you walk into a location, look around and see if there is anyone in there that you recognize. Another FIVEsquare miracle!

Badges and Titles: With FIVEsquare, you don’t have to go into a place a certain number of times or compete with others for rewards and titles. Simply decide (CLAIMsquare) what you want to be for this location (King, Mayor, Lord, Peasant, Dictator, etc) and claim it! Then, tell people that you are the ____ of _____ and they will give you just as much respect as anyone is getting on foursquare!

Locations: While foursquare only works in select cities, FIVEsquare already works world-wide. Any location, anytime. That’s our promise to you.

So…what are you waiting for? Whether you want to invite friends to join you somewhere via VOICEsquare, figure out where your friends are via SEEsquare, or increase your prestige via CLAIMsquare, you’re in business with our new startup. Get out there and start using FIVEsquare to improve your social life today!

p.s. To help spread the word about FIVEsquare, please use the #fivesquare tag and let your friends know that you connected to them via fivesquare. We’ll be running a beta-test in Louisville this evening.