Friday, June 29, 2012 1 comments

Jim Chanos' Bearish Views on Some Value Traps

I ran across the following presentation by Jim Chanos and thought you will find it insightful. Even if you aren't into short-selling—I am not—it is useful to see what sort of investments you may want to avoid. Value investors tend to ignore macro views but those who are more influenced by macro may want to pay attention to bearish views of any investments they are considering.

Back in May, Chanos gave this brief interview to Bloomberg briefly mentioning the topics covered in the presentation.

The presentation covers Chanos' bearish thoughts on what he feels are some characteristics of value traps. He goes on to list several investments that he views as value traps. Here are two summary slides from the presentation.




I share most of Jim Chanos' views and think investors should be careful with the areas he identified. For instance, I do think traditional PC manufacturers could lose big—he is bearish on HP—as tablets and mobile computing replaces PCs. Even companies like Microsoft could come under threat (he doesn't identify this).

He maintains his longer-term bearish view of some segments in the commodity complex, such as coal and iron ore miners. He is bearish on coal because natural gas, particularly from cheap shale gas, is replacing thermal coal in electricity-generating power plants. As for iron ore, it's a bearish bet stemming from a potential Chinese slowdown.

However, I'm not too sure about his short thesis for digital distribution. It could take a long time for companies like Coinstar, which owns Redbox, to materially suffer. For instance, even with digital e-books taking off, physical books are still selling reasonably well. Anyone betting on a collapse of the physical book market has been wrong so far (even though book sellers like Barnes & Noble and Borders have suffered).

The following presentation details his views:

Thanks to GuruFocus for bringing the presentation to my attention.

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Sunday, June 24, 2012 2 comments

Sunday Spectacle CLXXXI

The Exponential Growth in Photos

Oldest Photo of a Person
Boulevard du Temple by Daguerre, Paris, France (circa 1838)


(source: Scanned from The Photography Book, Phaidon Press, London, 1997. Downloaded from Wikipedia Commons on June 24, 2012)


Growth in Photos


(source: "How many photos have ever been taken?" By Jonathan Good, 1000memories blog, September 15, 2011.)


Largest Photo Libraries


(source: "How many photos have ever been taken?" By Jonathan Good, 1000memories blog, September 15, 2011.)



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Wednesday, June 20, 2012 0 comments

Sunday Spectacle CLXXX

A few days late but oh well... Great graphic by Asymco on the evolution of the computer industry...


Evolution of the Computer Industry



(source: "The evolution of the computing value chain," by Horace Deidu, Asymco. June 19 2012)

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Sunday, June 10, 2012 0 comments

Sunday Spectacle CLXXIX

Stock Buybacks & Dividends
1988 to 2010

Dividend payouts have not increased much over the 20+ years while buybacks have increased significantly. During the bubbly peak in 2007, more than $500 billion worth of shares were bought back—ironically at really high stock prices!!—whereas dividend payouts hit a little over $200 billion. Senior management and financial executives have no clue what they are doing when it comes to buying back shares (their buying is highly correlated with stock prices, which is not what you want).

Note that the figures are in millions i.e. In 1988, dividends of $100 billion were paid out while $50 billion worth of shares were bought back.

(I wrote a post on dividend payouts back in 2009 and some of you may be interested in that post as well.)

(click on image for larger one; quality isn't great)


(source: "Value Investing: Investing for Grown Ups?" by Aswath Damodaran, Stern School of Business, New York University. April 2012.
Electronic copy available at: http://ssrn.com/abstract=2042657)

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Sunday, June 3, 2012 0 comments

Sunday Spectacle CLXXVIII

A Look at
Unemployment in America
by Sector

You can get a feel for employment patterns in various industries in the following infographic. As always, keep in mind that some sectors, like manufacturing, are very large, so a 1% change has a bigger impact on GDP than, say, leisure and hospitality.

Some key points that stick out for me include:
  • Manufacturing was underperforming even before the recession (250,000+ job losses in 2004 and 2005, which were boom years. We are basically witnessing a secular decline in manufacturing in USA (and Canada too).)
  • Construction got hit hard during the recession (obviously driven by the real estate bust)
  • Government sector is starting to post job losses during the recovery over the last couple of years (this is likely due to government spending cuts)
(click on image for larger pic)







(source: "Rising UNemployment," Glassman Infographic. Design by Elefint. Downloaded from Fast Company, post dated May 23 2012.)

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