Wednesday, October 09, 2013

High End Mass Camera Market

A look at the high end mass camera market: Full-Frame Camera Mind Share

Sunday, March 17, 2013

Buffett's 2012 Letter

It is time of the year again for another Warren Buffett's letter to the shareholders (hopefully many more to come and to read). If you read one economic or financial text this year, this is IMHO a good choice.

OK, here are my marked lines for reference as well as a copy of the text with these annotations - of course, the original can be found here (as well as the ones for the previous years).

Here is an update of the two quantitative factors: In 2012 our per-share investments increased 15.7% to $113,786, and our per-share pre-tax earnings from businesses other than insurance and investments also increased 15.7% to $8,085.

Since 1970, our per-share investments have increased at a rate of 19.4% compounded annually, and our per-share earnings figure has grown at a 20.8% clip. It is no coincidence that the price of Berkshire stock over the 42-year period has increased at a rate very similar to that of our two measures of value. Charlie and I like to see gains in both areas, but our strong emphasis will always be on building operating earnings.

...

So how does our attractive float affect the calculations of intrinsic value? When Berkshire’s book value is calculated, the full amount of our float is deducted as a liability, just as if we had to pay it out tomorrow and were unable to replenish it. But that’s an incorrect way to look at float, which should instead be viewed as a revolving fund. If float is both costless and long-enduring, which I believe Berkshire’s will be, the true value of this liability is dramatically less than the accounting liability.

A partial offset to this overstated liability is $15.5 billion of “goodwill” that is attributable to our insurance companies and included in book value as an asset. In effect, this goodwill represents the price we paid for the float- generating capabilities of our insurance operations. The cost of the goodwill, however, has no bearing on its true value. For example, if an insurance business sustains large and prolonged underwriting losses, any goodwill asset carried on the books should be deemed valueless, whatever its original cost.

...

In last year’s tepid economy, for example, BNSF’s interest coverage was 9.6x. (Our definition of coverage is pre-tax earnings/interest, not EBITDA/interest, a commonly-used measure we view as deeply flawed.)
..
Indeed, we move more ton-miles of goods than anyone else, a fact making BNSF the most important artery in our economy’s circulatory system.
..
In addition, we are the leader in renewables: first, from a standing start nine years ago, we now account for 6% of the country’s wind generation capacity. Second, when we complete three projects now under construction, we will own about 14% of U.S. solar-generation capacity.

...

In contrast, the operating expense figures above are non-GAAP. In particular, they exclude some purchase-accounting items, primarily the amortization of certain intangible assets. We present the data in this manner because Charlie and I believe the adjusted numbers more accurately reflect the real expenses and profits of the businesses aggregated in the table.

I won’t explain all of the adjustments – some are small and arcane – but serious investors should understand the disparate nature of intangible assets: Some truly deplete over time while others never lose value. With software, for example, amortization charges are very real expenses. Charges against other intangibles such as the amortization of customer relationships, however, arise through purchase-accounting rules and are clearly not real expenses. GAAP accounting draws no distinction between the two types of charges. Both, that is, are recorded as expenses when calculating earnings – even though from an investor’s viewpoint they could not be more different.

In the GAAP-compliant figures we show on page 29, amortization charges of $600 million for the companies included in this section are deducted as expenses. We would call about 20% of these “real” – and indeed that is the portion we have included in the table above – and the rest not. This difference has become significant because of the many acquisitions we have made.

“Non-real” amortization expense also looms large at some of our major investees. IBM has made many small acquisitions in recent years and now regularly reports “adjusted operating earnings,” a non-GAAP figure that excludes certain purchase-accounting adjustments. Analysts focus on this number, as they should.

...

And that ends today’s accounting lecture. Why is no one shouting “More, more?”

...

Some of the
businesses enjoy terrific economics, measured by earnings on unleveraged net tangible assets that run from 25% after-tax to more than 100%. Others produce good returns in the area of 12-20%.

...

Viewed as a single entity, therefore, the companies in this group are an excellent business. They employ $22.6 billion of net tangible assets and, on that base, earned 16.3% after-tax.

Of course, a business with terrific economics can be a bad investment if the price paid is excessive. We have paid substantial premiums to net tangible assets for most of our businesses, a cost that is reflected in the large figure we show for intangible assets. Overall, however, we are getting a decent return on the capital we have deployed in this sector. Furthermore, the intrinsic value of the businesses, in aggregate, exceeds their carrying value by a good margin. Even so, the difference between intrinsic value and carrying value in the insurance and regulated- industry segments is far greater. It is there that the huge winners reside.

...

The derivatives we have sold that provide credit protection for corporate bonds will all expire in the next year. It’s now almost certain that our profit from these contracts will approximate $1 billion pre-tax. We also received very substantial sums upfront on these derivatives, and the “float” attributable to them has averaged about $2 billion over their five-year lives. All told, these derivatives have provided a more-than-satisfactory result, especially considering the fact that we were guaranteeing corporate credits – mostly of the high-yield variety – throughout the financial panic and subsequent recession.
..
Berkshire received premiums of $4.2 billion when we wrote the contracts that remain outstanding. If all of these contracts had come due at yearend 2011, we would have had to pay $6.2 billion; the corresponding figure at yearend 2012 was $3.9 billion. With this large drop in immediate settlement liability, we reduced our GAAP liability at yearend 2012 to $7.5 billion from $8.5 billion at the end of 2011. Though it’s no sure thing, Charlie and I believe it likely that the final liability will be considerably less than the amount we currently carry on our books. In the meantime, we can invest the $4.2 billion of float derived from these contracts as we see fit.

...

We Buy Some Newspapers . . . Newspapers?
..
Additionally, the ads themselves delivered information of vital interest to hordes of readers, in effect providing even more “news.” Editors would cringe at the thought, but for many readers learning what jobs or apartments were available, what supermarkets were carrying which weekend specials, or what movies were showing where and when was far more important than the views expressed on the editorial page.
..
Newspapers continue to reign supreme, however, in the delivery of local news. If you want to know what’s going on in your town – whether the news is about the mayor or taxes or high school football – there is no substitute for a local newspaper that is doing its job. A reader’s eyes may glaze over after they take in a couple of paragraphs about Canadian tariffs or political developments in Pakistan; a story about the reader himself or his neighbors will be read to the end. Wherever there is a pervasive sense of community, a paper that serves the special informational needs of that community will remain indispensable to a significant portion of its residents.

Even a valuable product, however, can self-destruct from a faulty business strategy. And that process has been underway during the past decade at almost all papers of size. Publishers – including Berkshire in Buffalo – have offered their paper free on the Internet while charging meaningful sums for the physical specimen. How could this lead to anything other than a sharp and steady drop in sales of the printed product? Falling circulation, moreover, makes a paper less essential to advertisers. Under these conditions, the “virtuous circle” of the past reverses.

The Wall Street Journal went to a pay model early. But the main exemplar for local newspapers is the Arkansas Democrat-Gazette, published by Walter Hussman, Jr. Walter also adopted a pay format early, and over the past decade his paper has retained its circulation far better than any other large paper in the country. Despite Walter’s powerful example, it’s only been in the last year or so that other papers, including Berkshire’s, have explored pay arrangements. Whatever works best – and the answer is not yet clear – will be copied widely.

************

Charlie and I believe that papers delivering comprehensive and reliable information to tightly-bound
communities and having a sensible Internet strategy will remain viable for a long time. We do not believe that success will come from cutting either the news content or frequency of publication. Indeed, skimpy news coverage will almost certainly lead to skimpy readership. And the less-than-daily publication that is now being tried in some large towns or cities – while it may improve profits in the short term – seems certain to diminish the papers’ relevance over time. Our goal is to keep our papers loaded with content of interest to our readers and to be paid appropriately by those who find us useful, whether the product they view is in their hands or on the Internet.

...

We originally said we would not pay more than 110% of book value, but that proved unrealistic. Therefore, we increased the limit to 120% in December when a large block became available at about 116% of book value.

But never forget: In repurchase decisions, price is all-important. Value is destroyed when purchases are made above intrinsic value. The directors and I believe that continuing shareholders are benefitted in a meaningful way by purchases up to our 120% limit.

...

Let me end this math exercise – and I can hear you cheering as I put away the dentist drill – by using my own case to illustrate how a shareholder’s regular disposals of shares can be accompanied by an increased investment in his or her business. For the last seven years, I have annually given away about 4.25% of my Berkshire shares. Through this process, my original position of 712,497,000 B-equivalent shares (split-adjusted) has decreased to 528,525,623 shares. Clearly my ownership percentage of the company has significantly decreased.

Yet my investment in the business has actually increased: The book value of my current interest in Berkshire considerably exceeds the book value attributable to my holdings of seven years ago. (The actual figures are $28.2 billion for 2005 and $40.2 billion for 2012.) In other words, I now have far more money working for me at Berkshire even though my ownership of the company has materially decreased. It’s also true that my share of both Berkshire’s intrinsic business value and the company’s normal earning power is far greater than it was in 2005. Over time, I expect this accretion of value to continue – albeit in a decidedly irregular fashion – even as I now annually give away more than 41⁄2% of my shares

...

Phil Fisher put it wonderfully 54 years ago in Chapter 7 of his Common Stocks and Uncommon Profits, a book that ranks behind only The Intelligent Investor and the 1940 edition of Security Analysis in the all-time-best list for the serious investor.

...

Carol Loomis, who has been invaluable to me in editing this letter since 1977, has recently authored Tap Dancing to Work: Warren Buffett on Practically Everything. She and I have cosigned 500 copies, available exclusively at the meeting.

The Outsiders, by William Thorndike, Jr., is an outstanding book about CEOs who excelled at capital allocation. It has an insightful chapter on our director, Tom Murphy, overall the best business manager I’ve ever met. I also recommend The Clash of the Cultures by Jack Bogle and Laura Rittenhouse’s Investing Between the Lines.

Wednesday, March 13, 2013

Gold in CHF: Major Highs and Lows


The above chart (click to enlarge) has the Swiss Franc's gold price's major lows and highs of the last ten years (almost) since the low of CHF 471.85 on 2003-08-05.

I made the chart recently for the standard gold price in USD, so this is a check how much the look differs in CHF.

So below are the longest lasting periods to get a next major high in CHF.

In comparison to USD, in CHF we are only in the seventh longest draught in this ten year big uptrend and with -12.52 % draw down this time not out of line compared to previous periods. However, the last two recent periods combined do look a bit flat and do add up to soon 400 business days.

BTW, the number of periods with higher highs and higher lows in CHF is almost double the ones than if looked at in USD.

But whatever, time will tell:).

Major Highs

High No. 1
Date range:                   2006-05-11 - 2008-02-21
Length in business days:      465
High:                         874.98
Low:                          695.05
Draw down during this period: -20.56 %

High No. 2
Date range:                   2004-04-02 - 2005-06-23
Length in business days:      319
High:                         544.83
Low:                          482.57
Draw down during this period: -11.43 %

High No. 3
Date range:                   2010-06-08 - 2011-08-23
Length in business days:      315
High:                         1'435.80
Low:                          1'211.12
Draw down during this period: -15.65 %

High No. 4
Date range:                   2011-09-09 - 2012-10-04
Length in business days:      266
High:                         1'640.32
Low:                          1'442.72
Draw down during this period: -12.05 %

High No. 5
Date range:                   2008-02-21 - 2009-02-20
Length in business days:      261
High:                         1'041.00
Low:                          818.89
Draw down during this period: -21.34 %

High No. 6
Date range:                   2009-02-20 - 2009-12-04
Length in business days:      205
High:                         1'172.34
Low:                          989.26
Draw down during this period: -15.62 %

High No. 7
Date range:                   2012-10-04 - today
Length in business days:      113
High:                         1'669.74
Low:                          1'460.74
Draw down during this period: -12.52 %

High No. 8
Date range:                   2006-01-09 - 2006-05-11
Length in business days:      88
High:                         693.69
Low:                          693.15
Draw down during this period: -0.08 %

High No. 9
Date range:                   2009-12-04 - 2010-03-05
Length in business days:      65
High:                         1'223.16
Low:                          1'124.61
Draw down during this period: -8.06 %

Thursday, March 07, 2013

Gold Major Highs and Lows


The above chart (click to enlarge) has the gold price's major lows and highs (London fix) of the last decade since the very low of USD 252.80 on 1999-07-20.

Nevertheless, it has also been some time since the last all time high of USD 1'895.00 on 2011-09-05, and right now the gold price is closer to the last major low of USD 1'531.00 than making a new all time high. However there have been three other instances during this time frame in which it took even longer to make a next higher high (but that might go down to only two in another three weeks), and also where the draw down has been also bigger in the area of -20 to -30 %. See the details below.

Anyway, just some reading in the tea leaves, or in other words - the trend is your friend, until the bend at the end.
Major Highs

High No. 1
Date range:                   1999-10-05 - 2002-05-29
Length in business days:      669
High:                         325.50
Low:                          255.95
Draw down during this period: -21.37 %

High No. 2
Date range:                   2006-05-12 - 2008-03-17
Length in business days:      462
High:                         725.00
Low:                          560.75
Draw down during this period: -22.66 %

High No. 3
Date range:                   2008-03-17 - 2009-09-17
Length in business days:      378
High:                         1'011.25
Low:                          712.50
Draw down during this period: -29.54 %

High No. 4
Date range:                   2011-09-05 - today
Length in business days:      364
High:                         1'895.00
Low:                          1'531.00
Draw down during this period: -19.21 %

High No. 5
Date range:                   2004-12-02 - 2005-10-11
Length in business days:      214
High:                         454.20
Low:                          411.10
Draw down during this period: -9.49 %

High No. 6
Date range:                   2002-05-29 - 2003-02-05
Length in business days:      173
High:                         327.05
Low:                          302.25
Draw down during this period: -7.58 %

High No. 7
Date range:                   2004-04-01 - 2004-12-02
Length in business days:      170
High:                         427.25
Low:                          375.00
Draw down during this period: -12.23 %

High No. 8
Date range:                   2003-02-05 - 2003-10-03
Length in business days:      145
High:                         382.10
Low:                          319.90
Draw down during this period: -16.28 %

High No. 9
Date range:                   2009-12-02 - 2010-06-28
Length in business days:      139
High:                         1'212.50
Low:                          1'058.00
Draw down during this period: -12.74 %

High No. 10
Date range:                   2003-10-03 - 2004-04-01
Length in business days:      126
High:                         384.25
Low:                          370.25
Draw down during this period: -3.64 %

Thursday, July 19, 2012

CHF Value

The Gold Purchasing Power of the Swiss Franc: Minus 70 % in less than 10 years.
 
Data source: Thomson Reuters Datastream

Saturday, April 21, 2012

Gold Line

FIXPM.LBM chart
Gold is pretty much in line for the last ten years...

Monday, December 12, 2011

Robert Fisk

Robert Fisk: Bankers are the dictators of the West

which then hand their democratic mandate and people's power to the banks and the derivative traders and the rating agencies, all three backed up by the slovenly and dishonest coterie of "experts" from America's top universities and "think tanks", who maintain the fiction that this is a crisis of globalisation rather than a massive financial con trick foisted on the voters.

The banks and the rating agencies have become the dictators of the West. Like the Mubaraks and Ben Alis, the banks believed – and still believe – they are owners of their countries. The elections which give them power have – through the gutlessness and collusion of governments – become as false as the polls to which the Arabs were forced to troop decade after decade to anoint their own national property owners. Goldman Sachs and the Royal Bank of Scotland became the Mubaraks and Ben Alis of the US and the UK, each gobbling up the people's wealth in bogus rewards and bonuses for their vicious bosses on a scale infinitely more rapacious than their greedy Arab dictator-brothers could imagine.

DBK.ETR chart
Deutsche Bank, Compensation and Benefits 2010: EUR 12'671'000'000

Saturday, December 03, 2011

Financial Corruption

Ron Hera shows some trends in the US (which of course are of great global influence) from the past 10+ years and, unfortunately, ongoing.

By Ron Hera: How The U.S. Will Become a 3rd World Country (Part 2)
Under ordinary circumstances, monetary inflation has the effect of redistributing wealth in favor of those who receive newly created money first.  The value of money is reduced as a function of the number of currency units in the economy but recipients of newly created money can spend it before it loses value.  In a declining economy, however, the wealth redistribution effects of inflation are magnified.

...

Among other things, U.S. tax policies will erode capital formation within the remnants of the middle class, which is the engine of small business creation and the source of most American jobs.  The eventual result will be a three-tier socioeconomic structure consisting of a super rich wealthy class, a much poorer working class and a massive, politically and financially disenfranchised underclass, similar to that of a 3rd world country.

Thursday, November 10, 2011

Occupy Paradeplatz Lindenhof Petition


Zürich, Lindenhof, 2011-10-27

Die Stadt Zurich möchte scheinbar das Camp der Occupy Paradeplatz Demonstranten nicht mehr auf dem Lindenhof haben.

Schade. Einen Hafenkran an der Limmat gleich unterhalb des Lindehofs möchte sie dagegen gerne installieren.

Hafenkran Limmat

Tagi: "Die Frage ist, ob wir gestaltete Plätze oder trostlose Flächen wollen"

Dann doch lieber ein nettes Sit-In, Aktionskunst sozusagen, für eine Gute Sache, um ein bisschen auf extreme Verwerfungen in unserem Finanzsystem hinzuweisen!

Also, jeder kann ein bisschen mitspielen, man muss nicht im Zelt überwintern - heutzutage reicht ein kleines Web Formular:-).

Hier ist die Online Petition, damit könnt ihr die Stadt Zürich über eure Meinung informieren.

Thursday, October 27, 2011

Grundeinkommen

Basic Income


Even the garbageman is streamlined away!

Food for thought in this video by a Swiss/German initiative.

Watch live streaming video from occupyzh at livestream.com

A version with English sub titles is here.

Occupy Paradeplatz at Lindenhof
Via Occupy Paradeplatz (2011-10-27).

Friday, September 16, 2011

Biggest Brokest Banks

Biggest banks by assets for the business year of 2010 in CHF billion:



Broken banks according to the market as of the close of 2011-09-15 by percentage of market capitalization in relation to their assets (aeh, basically liabilities;-):



Data source: Thomson Reuters Datastream

Thursday, September 15, 2011

Soros on Europe

From Zero Hedge: Soros Thinks The Unthinkable About Europe
All this would cost money. Under existing arrangements no more money is to be found and no new arrangements are allowed by the German Constitutional Court decision without the authorization of the Bundestag.

[Any solution] would presuppose a radical change of heart, particularly in Germany. The German public still thinks that it has a choice about whether to support the euro or to abandon it. That is a mistake. The euro exists and the assets and liabilities of the financial system are so intermingled on the basis of a common currency that a breakdown of the euro would cause a meltdown beyond the capacity of the authorities to contain. The longer it takes for the German public to realize this, the heavier the price they and the rest of the world will have to pay.
With a comment from jeff montanye:
sacrifice democracy and freedom because disentangling euro based accounting is too complex? aww, go on, give it a try. and remember: the bondholders, stockholders and current management are the first to make a sacrifice, not the last. see how far that gets you.
2011-08-17

Der Spiegel Interview with George Soros
SPIEGEL: Is the current crisis even worse than the one in 2008?

Soros: This crisis is still the continuation of the same crisis. In 2008, the financial system collapsed and it had to be put on artificial life support. The authorities managed to save the system. But the imbalances that caused the crisis have not been removed.

...

Soros: Of course, speculation will always make a crisis worse. If there is a weak point, it will expose it. And you are right, the CDS market is a very dangerous instrument and I think it should not be allowed. I am one of the very few people who argue that the CDS is a dangerous instrument because it is so lop-sided in favor of a negative outcome.

...

Soros: The indebtedness of the US is not all that high, but if a double-dip recession was in doubt a few weeks ago, it is less in doubt now, because financial markets have a very safe way of predicting the future. They cause it. And the markets have decided that America is going to see a recession, particularly after the recent downgrade of the US by the rating agency Standard & Poor’s.

SPIEGEL: President Barack Obama has been fiercely criticized for his handling of the economy. You were one of his biggest supporters in 2008. Are you happy with his economic policy?

Soros: No, of course not. But the reality is that we have had 25 years of excesses building up in America — a combustible mix of too much credit and too much leverage. You need a long time to reverse that.

...

SPIEGEL: The $800 billion stimulus program launched by Obama did not live up to that?

Soros: Obama’s stimulus program was not big enough and it was not directed at improving infrastructure nor human capital. So it was not productive enough.

SPIEGEL: And any further stimulus is now basically a non-starter, because the conservative majority in Congress is hell-bent on preventing it.

Soros: That is what is pushing the world towards another recession, into a double dip.

...

SPIEGEL: As an investor, do you listen to the rating agencies?

Soros: Well, I do not, but many other investors do.

...

SPIEGEL: In the end, will China be the only winner in this crisis?

Soros: China, of course, has been the great winner of globalization, and if globalization collapses, the Chinese will also be among the losers. So they have a strong interest in preserving the current global system. However, in some ways, they have been just as reluctant to accept it as the Germans. Germans have been hesitant to accept responsibility for Europe, and the Chinese have been hesitant to accept responsibility for the world. But they are both being pushed into it.

Thursday, September 01, 2011

Busting Banks

busting banks
Bank price sales multiples for 2011-08-31, market cap and sales in CHF billion.

Data source: Thomson Reuters Datastream