Tuesday, January 26, 2010

New blogs. Really, this time.

Yeah, I can't believe it either. The day has finally arrived. We're moving on up to Wordpress.

For occasional posts about specific securities, with a focus on the tiny, obscure stocks I've blogged about here, see Shadow Stocks. No rush to look there right now though, as I've been too busy for the last several hours trying to figure out Wordpress to think much about any specific securities.

For pretty much everything else, see Steam Catapult. See you over there.

Monday, January 25, 2010

Sex beats stocks

About a month ago, I contacted one of the founders of Kickstarter about using it to raise funds for a due diligence trip to Alloy Steel International's headquarters in Perth. I wrote,

I know from the Kickstarter site that you're currently only accepting projects through invitations, but I think mine is probably a little different than your typical request, so perhaps you'll make an exception (or connect me with someone who has an invitation to share?). Here's the idea.

I went on to explain that everyone who donated at least $100 to the trip would get a detailed report (one that didn't offer any financial advice and complied with all relevant securities regulations). Those who donated more (say, $300) would get the report along with a conference call with me where they could ask me additional questions, etc. The Kickstarter founder I contacted thought it was an interesting idea referred me to his staff members who review ideas for inclusion on the site.

One of those staff members sent me a rejection note a few days later. She wrote that "projects must also engage the community and offer tangible rewards".

I hadn't thought about that much in recent weeks. I've had my hands full with the launch of Portfolio Armor and a few other things, plus after my conversation with Alloy Steel exec Greg Muller followed by the company's revenue release earlier this month, I feel less of an immediate need to go to Perth. But I was reminded of this by an e-mail from a fellow AYSI shareholder yesterday. So I went to Kickstarter's website to copy its URL to paste in my e-mail reply and saw on the homepage this project, that did pass muster with the staff (and has raised more than double its goal in donations so far):

Coming & Crying: real stories about sex from the other side of the bed

About this project

Meaghan and Melissa (or,1 "we") met because of the internet and writing, and writing about sex (and blogging about writing about sex). Almost since then, we've been talking about how we need to do a book like this: a collection of stories (and photographs) from the messy, awkward, hilarious, painful, and ultimately true side of sex.

As part of this project, all of the money we raise together will go towards producing the book and to paying its contributors. The more we bring in, the more we can put out -- a prettier book, bigger take-home for our writers and photographers, and fancier packages for all those who pledge.

There's a ~2 minute video at the link above that gives you a better idea of what these two gals are working on.

I feel like a knucklehead now. I could have proposed as a project a documentary about sex in Perth, with its own alliterative title -- "Sexual Perversion in Perth" (betting that none of the Gen Yers on the Kickstarter staff would be familiar with Mamet play that title rips off) -- and then if I got accepted and funded, did my due diligence on Alloy Steel surreptitiously while I was down there.

1That's a "comma of apposition" for you aspiring grammarians out there.

Friday, January 22, 2010

Traveling without moving

Thursday afternoon, while working on my laptop at a local Starbucks, I ended up having a conversation with a couple nearby. It turned out they were from Paris, in the U.S. on vacation. Nothing too odd about that, but this particular Starbucks was tucked into a stretch of U.S. Route 46 chockablock with hubcap shops, fast food restaurants, hourly-rate motels, used car lots, a couple of BYO strip clubs, and a recently-demolished massage parlor. I go to that Starbucks sometimes because it gets a lot of late afternoon sunlight, but it's not somewhere I'd think of taking friends from out of town. Not exactly a tourist hotspot.

The couple explained that they had taken a year off to travel around the U.S., and had bought a used minivan (for $3k) at a used car lot near that Starbucks last spring. Now they were back after circling round the country and taking a detour into Mexico. They were planning to drive up to Canada for a couple of weeks to renew their tourist visas, but first they wanted to take their new American friend -- the guy who sold them the minivan -- out for a nice French dinner.

They asked if I knew any good French restaurants and I gave them a few ideas, and then let them borrow my laptop to book a hotel for the night. The husband gave me his business card: back in Paris he's a rédacteur en chef of a magazine. His wife was an editor too. The night before, I had been arguing with Trumwill on his blog that the class distinctions he and one of his guest bloggers frequently make are mostly pointless, partly because the demarcations they try to draw are so porous. And here, as if to underline my point, were two Parisian journalists befriending an American used car dealer.

Recently, on the 4HWW forums, someone mentioned CouchSurfer.org, a site built to connect couch surfers with hosts willing to let them sleep on their couches. In one of the testimonials on that site, a host said that hosting a foreign couch surfer was like "traveling without moving". Meeting that French couple in the Little Ferry Starbucks reminded me of that line, which in turn reminded me of where I'd first heard it: in Dune. Embedding is disabled for this one, but click the link and see 1:47-1:57 of the clip.

Dune: Folding Space

Thursday, January 21, 2010

Introducing Portfolio Armor

What Portfolio Armor is:

A site that enables investors to insure their stock and ETF investments (including ETFs that track indexes such as the S&P 500 and the Dow Jones Industrial Average) against market downturns as well as company- and sector-specific risk with put options.

Why put options?

Only put options protect you against losses when stocks or ETFs jump or "gap" downward. Limit sell orders don't do this. For more on put options, and how they can be used to hedge your risk, see Portfolio Armor for individual investors.

How it works:

You enter your stock and ETF holdings, and the maximum downside risk you are willing to accept for each holding. Then, using its proprietary algorithm, Portfolio Armor shows you the optimal put options to buy to obtain the level of protection you want at the lowest price.

Templates for the new blogs

Yes, there will be new blogs. The job is now in the hands of my crackerjack project manager Matt from Simande, who sent this list of 100 free WordPress themes to look at (he'll add logos and graphics the logo designer created). I have a theme in mind from this list, but I thought I'd see if anyone else had any favorites from the list.

Wednesday, January 20, 2010

Hitler on the GOP victory in Massachusetts

Downfall parodies never get old. This is the funniest yet.

BTW, I caught the last hour or so of Downfall on satellite a few years ago. It was quite good. Looks like Bruno Ganz won the German equivalent of a best actor Oscar for his turn as Hitler. Deservedly so.

Update on the OII/TRMA pairs trade.

On Jan 11th, I mentioned opening a pairs trade going long OII and short TRMA. Today I got stopped out of OII for a loss of slightly less than 9.5% and I covered my TRMA position for a little bit better than a 16% gain, so I made about 6.5% on this pairs trade. Not a home run, but better than a sharp stick in the eye.

More details on the Short Screen message boards.

Tuesday, January 19, 2010

More puts

I mentioned on this on the Short Screen message boards earlier today, but I picked up a few DIA puts today when my limit orders for puts on a couple of distressed companies didn't get filled. If I knew Scott Brown would win as decisively as he did in special election for U.S. Senator in MA tonight, I might have waited a day.

Subway-riding dogs

Last weekend's Financial Times featured an article by Susanne Sternthal, "A wolf in dog's clothing" (the photo above accompanied the article). I found this to be the most interesting part:

[Animal behavior specialist Andrei] Neuronov says there are some 500 strays that live in the metro stations, but only about 20 have learned how to ride the trains. This happened gradually, first as a way to broaden their territory. Later, it became a way of life. "Why should they go by foot if they can move around by public transport?" he asks.

"They orient themselves in a number of ways," Neuronov adds. They figure out where they are by smell, by recognising the name of the station from the recorded announcer's voice, and by time intervals. If, for example, you come every Monday and feed a dog, that dog will know when it's Monday and the hour to expect you, based on their sense of time intervals from their biological clocks."

I wonder if Kirstin Bakis read Sternthal's article and was inspired.

Sunday, January 17, 2010

On the rise of China

Again via Disqus, another comment I made on Fred's blog last week, this one in response to a comment by serial entrepreneur, civil engineer, retired U.S. Army officer, and current CEO of a bulletin board company1, JLM:

Interesting you mention James Kynge. I've blogged about his "China Continental" thesis a few times (Most recently, in the footnote to this post, where I also linked to an FT editorial that had a more bearish take on China's economy). I hope Kynge is right that China is transitioning to an economy fueled by internal demand; that would be good for average Chinese and the rest of the world too.

I have a tough time envisioning China becoming a global military hegemon, for a couple of reasons. The first reason that comes to mind is that the post-war status quo of U.S. Naval hegemony in the Pacific has been pretty good for China and its more advanced neighbors, economically speaking. Why mess with a good thing?

The second reason is that it's a lot easier to project power globally when you are surrounded by oceans on two sides and friendly neighbors to the North and South. China is cursed by geography by comparison. Consider some of its neighbors: Japan, which mopped the floor with China in WWII; Vietnam, which fought China to a standstill, if memory serves, a few decades ago; Russia; Mongolia -- sparsely populated, but a country whose ancestors conquered China and most of the rest of the world; India, the world's most populous democracy (and a country China has fought a war or two with in the past, when India was weaker); Pakistan; Afghanistan. Add to that mix separatist Tibetans in China's southwest and separatist Muslims in China's northeast. I suspect the submarine-building (China still spends a pittance on military procurement, compared to us) is more about keeping the steel mills humming.

A more likely scenario -- and a more ominous one -- if current trends (i.e., certain self-destructive American policies) hold isn't China replacing the U.S. as a global superpower, but the world having no such superpower.

1One that had an Altman Z"-score in the distress zone, last time I checked. I mentioned this to JLM via e-mail, and he said he penned (keyed?) an in-depth response, but it was eaten up by the aether and I never received it.

On charitable donations for Haiti

It occurs to me that some of my better comments appear on other blogs. Via Disqus (which will be added to my new, much-delayed blogs), here is a comment I made on Fred Wilson's blog on the big outpouring of charitable donations in response to the earthquake in Haiti:

I am curious where all of this money will go. It seems like absolutely enormous amounts of money are being raised for Haiti right now (Whole Foods has its cashiers soliciting donations, for example).

Ideally, Doctors without Borders and other respected charities will get to keep some of these donations for future disasters. There is, in a sense, an inefficient market for charity, and organizations ought to be able to keep some of the surge money they raise for future contingencies (and be honest about that). I remember the controversy after 9/11 when the Red Cross planned to use some of the huge amount of money it raised to build blood banks (if memory serves), but public outcry forced them to spend it all on 9/11, even though government aid was already flooding in. I remember hearing about the challenges the Red Cross had in trying to donate all that money.

Haiti, as a perennial failed state, presents challenges of its own. Once the survivors have been pulled from the rubble, treated and fed; once the dead have been buried -- then what?

The editorial cartoon above, by Peter Brookes, is from the Times Online.

Saturday, January 16, 2010

Destiny Media update

I mentioned last month that I had sold out of Destiny Media Technologies (OTC BB: DSNY.OB). At the time, I noted,

I still like the company's story, and I expect it will post relatively impressive numbers in its upcoming fiscal Q1 (seasonally, its strongest quarter), but I got the sense from the reaction of some Destiny longs to the guidance the company issued back in October that some of them had overly optimistic ideas about the company's growth potential next year. Some seemed to assume that the sequential growth the company had predicted from Q4 to Q1 would continue at the same clip going forward. They also seemed to ignore that Destiny's fiscal Q2 is its weakest seasonally.

I'd like to see what that Q2 looks like. Depending on those results, I may buy back into this if the price looks attractive relative to my sense of the company's forward earnings prospects.

All still true today, though I should add (and probably should have added then) that, in the course of several conversations with him, Destiny Media's CFO Fred Vandenberg struck me a straight shooter and a good guy. Destiny issued this release after midnight on Thursday, Destiny Media Q1 Record Revenues Jump 89%: Third Consecutive Profitable Quarter Shows Over 39% Increase in Operating Income.

The stock had a small bump on Thursday, then dropped 15% yesterday, to 44 cents per share, a penny below the price at which I sold it last month. Perhaps other shareholders are having the same valuation concerns I had last month. With six-tenths of a penny in earnings per share in its seasonally-strongest quarter, I remain skeptical of Aaron Edelheit's estimate of 5 cents in fiscal 2010 earnings. Still interested in seeing what its Q2 looks like.

A couple of updates

There are still some good people in the investment industry, and I was fortunate to speak with a few real gentlemen this week: Bill Singer of RRBD Law, Marc Mayor of Inside ALPHA, and Mark Sullivan of First Trust. All offered some excellent suggestions, some of which I will be implementing soon. Herewith, a couple of updates:

- The new blogs. Sometimes it's harder to find people to do the simpler jobs than the more complex ones. Things didn't work out with the previous vendor and I have requested a quote from another one. Hopefully, these blogs will be up and running soon. I'd like to start the comment contest soon, because the first prize gift certificate is for dinner at a restaurant chain that has an Altman Z"-score in the distress zone. If I had more time and patience, I'd set these blogs up myself. I may end up doing that.

- Portfolio Armor. We are putting the finishing touches on it. I am excited. I think this will be a useful tool for a lot of investors, myself included.

The limits of un-hedged, long-only investing in a secular bear market

In the comment thread of a previous post ("Welcome to another lost decade"), commenter Brad Castro wrote,

dividend growth investing (in high quality companies), I argue, is immensely superior to simple growth investing, and especially so during secular bear markets.

I offered this response in the comment thread,

I had the same thought five years ago, when I bought shares of PFE, GE, AB, etc. and set them up for dividend reinvestment in an IRA. Take a moment to pull up the five year charts on those stocks.

Any form of un-hedged, long-only investing insufficient in a secular bear market, unless you time your purchases so you make them at or near the secular market low in valuations.

But a chart is worth a thousand words:

Friday, January 15, 2010

Scene from the real estate bust

I had a late breakfast today with my sister at the place above, which is located in a working class town nearby. $11.50 for two orders of scrambled eggs with diced tomatoes and onion, one order of Spanish sausage, a cheese-filled pastry, and two cafés con leche. That photo was snapped at about 10:30am today, right after we left. Those are a couple of migrant day workers walking in. Chances are, they won't get any work today. Contractors usually pick up their illegal laborers earlier in the morning.

Nearby, there were a couple of pairs of day laborers lingering, waiting for work. At the height of the real estate bubble, there would be dozens.

Wednesday, January 13, 2010

Updates on the out-of-the-money put basket

I've been a little swamped today putting the finishing touches on Portfolio Armor, but here are a few quick updates on my put basket. Recall that in a post at the end of last year ("New short position: UAUA") I wrote,

With the Nasdaq near a 14-month high, and the VIX near a 14-month low, I have been building a basket of out-of-the-market puts on financially-distressed stocks drawn from Short Screen's screener1. Today's addition to this basket are the $6 strike, JUN 10 puts on United Airlines parent UAL Corporation (Nasdaq: UAUA), UALRK.X. I bought a few of these today at $0.40.

Those puts are now trading at $0.35 -- they dropped 12% last week a day before a report from Continental broke that moved the underlying stock higher1. UAUA was up ~10% today, but not enough to move my out-of-the-money puts again.

Virgin Media, another company in the put basket, priced a junk bond offering today. I wonder if some income-oriented investors are going to pick up long-dated puts on VMED now, with the intent of buying its junk bonds after the credit markets tighten and yields rise.

I mentioned this on Short Screen earlier, but I added a few out-of-the-money JUN 10 puts on TBSI to the basket today.

1Andy Swan has described options as the "'tells' of the underlying".

Tuesday, January 12, 2010

News from Alloy Steel

Alloy Steel International (OTC BB: AYSI.OB) issued this press release less than an hour ago, "World First Product Secures Growth for Alloy Steel". The full text of it is below, but according to the release, despite shutting down for at least the last week in December, revenues for the company's fiscal Q1 2010 (which corresponds to Q4 calender 2009) were up ~37% sequentially from Q4.

PERTH, AUSTRALIA--(Marketwire - 01/12/10) - The introduction of the new thicker Super Alloy Arcoplate onto the market this year has cemented Alloy Steel's (OTC.BB:AYSI - News) standing as a world leader in bi-metallic overlay technology.

As the first company to develop and manufacture the thicker alloy, Alloy Steel is now in an unrivalled position and set to continue on a growth path in coming years.

The past 18 months have been difficult for mining and mining service companies worldwide due to international economic conditions. However, Alloy Steel has not only weathered the financial storm but has improved and strengthened its market position. The company has increased its market share in Western Australia from 20 percent to an estimated 80 percent in just two years as a result of a concerted effort from the entire team.

According to Mr Kostecki, the company's founder and CEO, this year's result is "truly a remarkable achievement given the difficult times which were experienced by clients and ourselves in the downturned economy.

"The company is now well placed to face 2010 in a very positive manner to achieve increased sales, and continued growth and market share across the entire mining and mineral processing spectrum."

New Super Alloy Arcoplate was developed to solve problems caused by wear and hangup. These two issues can plague mining, quarrying, power generation, cement production and other industries, and can cause immense productivity and profit losses.

Alloy Steel used cutting-edge technology to create an alloy overlay over 3/4 of an inch thick in a single pass operation. Conventional methods involve multi-pass overlays using layer-upon-layer welding methods.

Field trials for the new product show outstanding results. The Super Alloy Arcoplate outperforms conventional weld overlay in abrasive wear applications of similar alloy thickness between two and twelve times.

Alloy Steel is currently negotiating supply contracts with major iron ore mining companies. Super Alloy Arcoplate will be used for upgrades and continuing wear plate requirements. There is increasing demand for the product in Western Australia, an area with vast iron ore resources and home to some of the largest iron ore mining companies in the world.

However, as reported from previous filings, Alloy Steel has not been immune to the effects of the economic crisis. This is evidenced by the depressed commodity markets in the first nine months of the financial year.

Investors should be aware that the new Arcoplate Mill was completed and commissioned in the current financial year. Costs required by accounting standards have been expensed to profits resulting from the operations. This has reduced the company's bottom line result accordingly.

Costs incurred from developments were settled using internal cash flow and cash reserves. Alloy Steel used available staff and facilities, and achieved considerable cost savings by carrying out this work 'in-house.'

The following comments should be considered when considering the company's financial performance for the year.

After add-backs for once-off items, the company shows an approximate net profit before tax of $2,150,000.

Add-back items include materials and other costs that have been expensed in relation to completion of the new machine and include:

-- Commissioning and testing of the new machine
-- Diminution in listed investments
-- Foreign exchange loss due to the appreciating Australian dollar compared
with a small foreign exchange gain in the previous year.

The first quarter of the 2010 financial year (Oct to Dec) has shown sales of:

Oct $ 1,910,330 USD
Nov $ 2,997,347 USD
Dec $ 831,639 USD

Total for quarter: $ 5,739,316 USD

December is a short trading month because of Christmas and New Year holidays.

Extrapolating these figures shows an excellent potential result for the full year.

To give 2010 a flying start, the company is pleased to advise that Synohydro Corporation of Beijing - China has confirmed a second supply contract for Arcoplate as part of their dam enhancement program in the Sudan.

This contract to the value of USD 921,000 is a direct result of the performance of the product previously supplied and the ability of Alloy steel to provide on time delivery of quality price/performance product.

The contract is also based on favourable payment terms to Alloy Steel.

The company and the directors are highly confident for the future for Alloy Steel.

For further information please contact CFO Mr. Alan Winduss +61 412949225

Coming soon to Madison Square Garden?

New York Governor David Paterson has been struggling with his state's bleak fiscal outlook, and now wants to lift New York's 13-year-old ban on mixed martial arts exhibitions in order to collect sales tax revenue off of it.

Back when New York banned MMA, if memory serves, participation in the sport was limited to men only (I believe that's still the case with the UFC league). Today there are women fighting too, and some of them are pretty impressive. One of the ladies below does a nice job of finishing the fight (this fight took place last fall, but I just caught a replay of it on Showtime last week).

Monday, January 11, 2010

"Welcome to another lost decade"

Vitaliy Katsenelson recapitulates his secular range-bound market thesis on GuruFocus today ("Welcome to another Lost Decade"), this time with a slight twist: he thinks a 1990-? Japan-style bear market is also a possibility going forward. As I noted in the comments there, Katsenelson's diagnosis makes sense, but his prescription ("active value investing") seems limited:

why rely on any form of long-only investing -- even his active value investing -- if we are in for possibly another decade like the last one? How did long-only value investing fare in 2000-2002 or 2007-2008? How will it fare when the current cyclical bull rally inevitably leads to another cyclical bear correction?

Altman Z"-score pairs trade: Long OII; Short TRMA

As of Friday's close, Short Screen showed an Altman Z"-Score of -0.13 for Trico Marine Services (Nasdaq: TRMA) and an Altman Z"-score of 9 for Oceaneering International (NYSE: OII). Recall that Z"-scores below 1.1 indicate financial distress and risk of bankruptcy, and scores above 2.6 indicate financial strength (scores in between are in the gray zone). Today I shorted TRMA at $5.31 per share and bought an equivalent dollar amount of OII at $64.70 per share.

Sunday, January 10, 2010

An acquired taste

After noticing one of my tires was getting flat, I stopped by Costco today to have it fixed. There was a three hour wait at the tire center, so I called a cab and took a walk through Costco's liquor store while waiting for it. A Korean gentleman walked over when I was looking at a six pack of this,

And he recommended it. So I bought it. Just opened it a few minutes ago. The first surprise was finding this inside the box:

Here's a close up of that:

It's some sort of face mask, apparently. Odd to find in a six pack of an adult beverage.

Apparently, this stuff is an acquired taste. To me, it tastes like what a rocks glass of vodka tastes like after the ice melts. Which makes sense, considering that this Korean beverage is distilled from sweet potatoes and is about 20% alcohol -- about half the alcohol content as a typical 80 proof vodka. This stuff might work as a component in a sake sangria though.

Friday, January 8, 2010

Another example of clever searching from that submarine book

In the previous post on Blind Man's Bluff: The Untold Story of American Submarine Espionage, by Sherry Sontag and Christopher Drew, I mentioned an example from the book of a clever approach to finding a needle in a haystack (the use of Bayesian analysis to find a lost nuclear weapon). There was another example in the book, that employed an entirely different sort of cleverness.

In 1970, James Bradley, the director of undersea warfare at the Office of Naval Intelligence, thought there must have been an undersea telephone cable connecting the Soviet missile sub base at Petropavlovsk, on the Kamchatka peninsula, to the Russian mainland across the Sea of Okhotsk. Bradley figured such a cable would be at most 5 inches thick. How do you find a 5 inch thick cable at the bottom of a sea?

It turned out that, as a boy, Bradley had killed time hitching rides on riverboats on the Mississippi, and he remembered seeing signs on the shore occasionally that warned, "Cable Crossing: Do Not Anchor". So (after some political maneuvering the book recounts in detail) Bradley sent a submarine crew to look for a similar sign on the shore of the Sea of Okhotsk. They found one, found the cable, and successfully tapped it. The Soviets hadn't coded their communications through the cable, because they never expected it would be tapped.

Thursday, January 7, 2010

A young, European Ahmadinejad

At the end of last year, lefty blogger/policy wonk Matthew Yglesias mentioned Camera Obscura's song French Navy as one of the best of 2009. I had never heard of them, so I looked them up and listened to the song, which is quite catchy and retro. Below is the video, which features some scenic shots of Paris and Rome. Below the video are a few observations about it.


- The band's lead singer reminds me a little of a JetBlue flight attendant with her outfit.

- The blond fellow behind her reminds me a little of the blond guy from Trainspotting (perhaps partly because the band is from Scotland).

- Cheryl mentioned this one first, but I concur that the bearded young man gallivanting around France and Italy with his girl in the video looks sort of like a young, European version of Iranian President Mahmoud Ahmadinejad.

Wednesday, January 6, 2010

Response from Alloy Steel's CEO

In the previous post I mentioned I received a response today from Alloy Steel International (OTC BB: AYSI.OB) CEO Gene Kostecki to the e-mail I sent him on 12/23 asking if the company was still planning to build two additional mills in 2010. Below is his response.

Hi David,

We are still planning on increasing our production capacity by an additional two mills in 2010 subject to orders being received as in the last half of 2009 with BHP. It must be remembered that AYSI is no ordinary company -- the technology that is being developed in-house is like comparing the normal weld overlay manufactures to the original IBM punch card computers, whereas the technology that has since been developed by AYSI can be compared to the latest quad core computers which puts our product light years ahead in terms of price, quality and performance of our nearest competition. With our outstanding field test results across the entire spectrum in mining and materials handling having established this technical lead, it is our intention to grow this company with the absolute minimum overhead.

The beauty of all this is that our mills do not need any more additional staff other than that needed to support another mill with 3 additional support bodies.

By the way David, rumor has it that we are driving our main competitor nuts as they have not won a major contract since we launched out new mill and the new super Arcoplate project.

Kind Regards and wishing you all the very best in 2010,

Gene Kostecki

An assortment of updates

First, a request: if any of you know of a finance professor who is an acknowledged options expert and might be willing to consider a quick consulting project (shouldn't require more than an hour of his time), please e-mail me at contact[at]shortscreen.com. Thanks.

Now, on to some assorted updates and musings.

Sorry for the lack of posts over the last few days. I meant to post something last night, but after a late, gluttonous, feast at George's favorite New York restaurant (Balthazar) last night I was too beat to post or check e-mails when I got home. Before dinner, I had taken George to meet my developers at Simande. George is considering making some modest updates to his business's computer system (he's currently running it on DOS). I mentioned to the Simande guys that George first set up his system when Tronwas playing in the movie theaters. After a beat, Matt asked, "When did that come out, early 80's?". "Yeah," I replied. "That's when we were born," said Matt. For Matt, here is the trailer for Tron:

I believe a remake of Tron is in the works.

After leaving Simande HQ, we met George's old friend Frank at Balthazar. Balthazar is sort of an upscale version of the French Roast, but Balthazar has its own excellent bakery (located, conveniently enough for us, in nearby Englewood, NJ.). After a few bottles of Bollinger for the table, Frank, an actor/playwright, was in a feisty mood. He launched into some of the political arguments you might expect from a New Yorker, with gusto.

I remembered from meeting him on previous occasions that Frank had mentioned he was friends with Al Pacino, so in an effort to deflect him from politics, I asked him questions about Pacino's performance in Heat (e.g., Why was his character chewing what appeared to be a half-piece of gum throughout the whole movie? Why did he always hang up on everyone without saying "goodbye"?). We probably would have gone through less of the champagne (which was wasted on my palate; I can get heartburn just as easily from a $10 bottle of cava) if George hadn't ordered one of those multi-tiered shellfish appetizers for the table, which the waiters consolidated to lower tiers Tetris-style as we ate). In any case, it was a good dinner with good company, but I ate way too much. Balancing that out today by just having a piece of toast and some ginger ale for lunch. Onto some updates:

Investment stuff:

- AYSI.OB: Got a belated response today from the CEO re the e-mail I sent him when they filed the 10-K on 12/23. I'll post on that separately in a little bit.

- USEG: Up today on this news from yesterday about the latest positive well result from its Bakken deal with BEXP, and this news from today that it received its $1 million option payment from Thompson Creek related to the molybdenum project, and that Thompson creek has budgeted several million more dollars for preliminary work on the project this year.

- The United Airlines puts: These went against me a little this week, a day before Continental announced its positive results. Steady as she goes though.

New blogs:

After e-mailing my logo designer's gal Friday asking her, essentially, "WTF?", she wrote back pleading technical difficulties and saying that if she could crawl into the computer and push the process along she would. The thought of her and him being sucked into a computer Tron-style and forced to play in one of the movie's Jai Alai death matches brings me a small measure of comfort at this point.

Saturday, January 2, 2010

Using Bayesian Analysis to find a lost nuclear weapon

Ten years ago I picked this book up at an airport bookstore, Blind Man's Bluff: The Untold Story of American Submarine Espionage, by Sherry Sontag and Christopher Drew. Some thinking I've been doing recently related to a project reminded me of this example of Bayesian Analysis described in the book:

[In January, 1966] A B-52 bomber had collided with an air tanker during a refueling operation 30,000 feet in the air off the coast of Palomares, Spain, losing its atomic payload. Three of the four bombs were recovered almost immediately. But a fourth was lost and had presumably fallen to the bottom of the Mediterranean.


[Naval intelligence officer John P.] Craven called in a group of mathematicians and set them to work constructing a map of the sea bottom outside Palomeres.


Once the map was completed, Craven asked a group of submarine and salvage experts to place Las Vegas-style bets on the probability of each of the different scenarios that might describe the bomb's loss being considered by the search team in Spain. Each scenario left the weapon in a different location.

Then, each possible location was run through a formula that was based on the odds created by the betting round. The locations were then replotted, yards or miles away from where logic and acoustic science alone would place them.


[Craven] was relying on Bayes' theorem


Craven applied that doctrine to the search. The bomb had been hitched to two parachutes. He took bets on whether both had opened, or one, or none. He went through the same exercise over each possible detail of the crash. His team of mathematicians wrote out possible endings to the crash story and took bets on which they believed most. After the betting rounds were over, they used the odds they created to assign probability quotients to several possible locations. Then they mapped those probabilities and came up with the most probably site and several other possible ones.

Without ever having gone to sea, the team now believed they knew where the bomb was [...] in a deep ravine [far from where the first three bombs were recovered].

Long story short, a deep sea submersible found the bomb in that ravine, right where the calculations plotted it would be.

Friday, January 1, 2010

Happiness and social media success

Happy New Year, everyone. Since he-who-shall-remain-nameless still hasn't finished setting up the new Wordpress blogs (partly because, apparently, he is unfamiliar with Disqus, which Cheryl was able to set up on her own blog in a few minutes), I'll keep posting here for a little while longer. One of the nice things about Disqus, incidentally, is that it makes it easy to follow your favorite commenters as well as bloggers. For example, you can follow my comments on Disqus-powered blogs by clicking here: http://disqus.com/daveinhackensack/. The last few comments that come up at that link (in reverse chronological order) I made a little while ago in the comment thread of this post by Fred Wilson1, The Happiness Project - A New Year's Resolution.

You can click on that link to Fred's blog post for the whole exchange, but I'll summarize and excerpt it here, as it relates to a topic I've blogged about before (e.g., here). After recommending Gretchen Rubin's book "The Happiness Project", Fred wrote about her use of social media to promote it,

I'd like to end with a few words on Gretchen's adoption of blogging and social media during her happiness project. In the second month of her twelve month program, she decides to start a blog. It becomes the Happiness Project blog. She figures out how to set up a TypePad account, she decides to blog six days a week religiously, and she starts using Facebook and Twitter. That's how I met Gretchen. Her husband, who is featured prominently in the book and who I've known for a dedade, emailed me last summer and said "my wife Gretchen is getting totally into this social media stuff and I wonder if you might give her some advice". We met for lunch and I gave her a bunch of advice, but was impressed at how much she had already figured out on her own.


So let's all buy her book , get a bit happier, and show that social media can put an author at the top of Amazon's bestseller list.

In response, I wrote (in part),

Social media success in this case would have something to do with having the access and support of prominent bloggers such as you and your wife. This reminds me of a discussion I had with Andy Swan in a comment thread on this blog a month ago, in your post about "The Fall and Rise of Media". Back then I noted,

There are still velvet ropes; it's just that top tier bloggers (including multimedia stars such as Breitbart or Godin) have their own velvet ropes now. The average person starting a blog today doesn't have much more voice than he did when his broadcasting options were limited to writing letters to the editor of newspapers, calling into talk radio, or going on public access TV.

Gretchen Rubin got past the velvet ropes of your blog (and signed on the Gotham Gal [Fred's wife, who blogs under that pseudonym] as a legitimate affiliate) in part apparently because you've known* her husband for ten years. Not exactly social media success ex nihilo.

*Edited as per Fred's correction.

Fred retorted that he wasn't exactly friends with Mr. Rubin; he had just known him for ten years. And that Gretchen Rubin's social media success would have happened without his help. Perhaps so, but then Cheryl shared some background with me on who Gretchen Rubin was. As I noted in Fred's comment thread,

BTW, Hackensack Gal informs me Gretchen Rubin appears on Slate (owned by social media start-up The Washington Post Co.), is a former prominent attorney (including a stint as Supreme Court clerk for Justice O'Connor), and daughter-in-law of former Goldman Sachs chief, former U.S. Treasury Secretary, and former Citigroup consigliere Robert Rubin. Again, there's nothing wrong with any of that, but it supports my initial impression that this wasn't an example of social media success ex nihilo

1Fred's not just a user of Disqus but an investor in it, via his Union Square Ventures.