The law of disproportionate results and catastrophe avoidance

Four idiots in a boat

This is a true story without exaggeration. Two years ago, I was out in the lake in my boat with a few friends wakesurfing and chilling as I usually do in summer. I took my neighbor out for a ride for the first time and we went out into the middle of the lake because there were no boats around and we had the whole lake to ourselves. After getting set up and taking off for the first pull, the boat steered to the right with complete disregard for the steering wheel. My neighbor was stuck in the water and the boat was driving in circles.

Here's where it gets interesting

So we're driving around in circles trying to figure out what's going on and the neighbor is stuck way back in the middle of the lake. At this point the boat is feeling really heavy and I'm getting a little freaked out so I popped open the engine lid and much to my horror there was two feet of water in there! We were fucking sinking and driving in circles.

Why did this happen?

The year before I hit a rock and broke off my rudder and squashed my propeller. That sucked and was mighty expensive but I had no choice but to get it fixed, new rudder, propeller etc. A local guy did the work, did a great job BUT he forgot to put in a safety wire on the locking nut that held the rudder in place. So what happened was that the nut came off, the rudder sunk to the bottom of the lake and left a hole 2 inches wide in the bottom of my boat. We're not talking about a little fishing boat here, the beast is a 425hp top of the line wakeboard boat worth as much as a high end luxury car.

Now what?

After my initial shock, I got out a pump and had Rick pump out water, Al got in the water and tried steering with his body, we were all yelling, sinking and driving in circles and there was nobody around to save us. Meanwhile my poor neighbor was stuck in the middle of the lake watching this all go down.

A bit of luck

The engine was nearly under water but still running, the back of the boat was deep in the water and the front sticking up to the sky when my neighbors brother in law just happened to whiz by on a jet ski. He was the only dude on the lake and just happened to come around 2 minutes before we were going to be sunk. We threw him a line and he dragged me to my beach where the boat sunk to the bottom of 2 feet of water and rested on the sand.

The moral of the story

We were idiots, out there yelling and screaming, pumping water, dangerously trying to push the boat next to a spinning propeller, all in all being complete and utter fools when all we had to do was grab a sock and stick it in the rudder hole. The boat would have pumped out the water by itself and we could have steered with a paddle. A near catastrophe when it could have been a minor incident.

The moral of the story is that in life there are certain things that you can do to get far more results and spend way less energy on if you just take a second to think about it. Oh yeah, the second moral is that they don't call it "safety" wire for nothing.

I call this the law of disproportionate results.

I gotta bounce, talk to y'all later.

More on Joost/Sling and CBS

Things have heated up in the past couple of days with CBS announcing a big deal with AOL, Microsoft, CNET Networks, Comcast, Joost, Bebo, Brightcove, Netvibes, Sling Media and Veoh.


This is in direct competition with Gootube, so who's going to win? I think that both will win. The folks that own the content aren't going to walk away from googles billions of viewers and the ad revenue that they'll bring and at the same time, they won't sit around and let google eat their lunch so easily. I think that both channels will do well and we'll just consider them different sources for some of the same content. Just like when you get cable and the same show plays on different channels.

The really interesting thing that's come up is that Sling is integrating the CBS player into their own and I missed this one but in January they announced the Slingcatcher which pushes computer content to your TV via wifi. Very exciting space right now.

Another response from Cuban

After I asked Mark about DIVX/Joost, he posted this entry on his blog regarding the opposite of what I was saying. In a nutshell Mark thinks its a better idea to push content from TVs to the PC rather than the other way around. I guess that Sling and "Tivo to go" fit into that category. I'm not sure if his post was in response to my question but I guess it's a good answer although not exactly what I was expecting.

There were a couple of companies in the boom days that did this kind of stuff (lysis etc.), never went anywhere so let's see who's right. I'll link back to this in a couple of years to see how this went. Any wagers???

Mark Cuban on DIVX

I asked Mark Cuban today about what he thought about DIVX, here's a roughly edited email transcript. I didn't ask him for permission but I figured that there's nothing controversial about his opinion so I've left his words verbatim:


Hey Mark,
I was wondering what your take was on DIVX and their business model. They seem to be the only guys out there making real revenue/profit on both the technology, carriage and content. The CEO Jordan used to be with InterVu and was one of the guys who was part of the team that tried to buy us out back in the day. When he started DIVX he wanted me to merge with him in an unnamed business. I never did and still don't regret it. InterVu were a bunch of clowns but this guy seems to have his ducks in order.
Curious about your take on Joost as well. Seems to me that Joost, slingmedia, divx and torrents are the current big undertow that will show up as a tidal wave on the mainstream radar soon enough when it claws double digit revenue out of their pockets.
Just a thought for an interesting blog post.
Take it easy,
Sanj


Basically all the companies you mention as having a big undertow, will be small roleplayers.
Internet video doesn't have a way to get in the family room with out a lot of work and expense. Until that changes and bandwidth gets about 25mbs, they are niches
m


I think you're right about both points but I am not sure what you consider the timing to be, I am convinced that the XBOX, Apple TV & Media center extenders built into new TVs are 2-5 years from critical mass and the usable 25Mbps is probably 4-10yrs out for HD and 2-5 years out for SD.
s


So I thought about what he said for a while and figured that there were 2 possible outcomes:

1) Licensing, DRM, shit bandwidth and crappy devices will make internet video a novelty until the 15 year old gootubers get their own homes in 10 years

2) Something (Joost/XBOX/Apple) will catch on fire quick and get adopted by 100 million people in their living rooms within 3 years

What do you think?

Mo Joose

Some people have asked me about how to get on the Joost beta, other than signing up and waiting for an invite I don't have any idea if there is a shortcut.

On a different topic, DIVX is up 20% in the after hours. Here are my best calls of the year:

MGO - called at 4.30, now at 6.39 :))
EDA - called at 9, currently at 11.25
NTRI - called at 41.25, currently at 55.69
DIVX - called at 19.70 and 18.30, after hours at 23.50 - 24
SYK - called at 63.35, now at 68.49
HP - called at 23, now at 31

My next two favorite stocks to pop within the year are VRNT and MPEL. MPEL is the riskiest but I'm ready to stay long for several years on that one. I think that VRNT will pop after it gets listed again and reports a decent quarter.

My worst stocks were MSFT, TM and some small cap Canadian stocks. These might do well in the long term but are not great trades right now until some catalyst comes along.

Overall, I'm up 9% this year, heavily weighted on DIVX, HP and VRNT, while the S&P 500 is up .06% during the same period. I'm not sure if I can keep this up but I'm loving it so far. Almost all of the companies (except MPEL) have existing stable business and my buys have been based on unfair market punishment that was out of whack with basic fundamentals (PE, PEG, etc.).

Having said that, I spend at least 20-30 hours a week at this and have the luxury of being able
to spend 5-10 hours a week researching during work hours because I'm the boss and I spend 12hrs a day at work with much of my time spent waiting for other people.

My recommendation to anybody reading this and salivating over all the money that they can make is to make sure that you love it, that you take the time to understand the fundamentals of valuations, that you spend time practicing (I practiced it for 4 years) and lastly make sure that you have the ongoing time to commit to it.

If you don't know what you're doing, you're just another chump taking stock tips who'll lose all your money while the smart guys are whipping in and out without telling you.

Here comes the Joose

I'm digging Joost these days. I cancelled my home phone and internet because I'm moving soon so I can't use my slingbox, Joost is a great way to watch TV at work. I'm looking forward to having it on a big screen/projector at home. Think P2P TV, skyp-ish.

Fast forward into ferro fluids

Ferro fluids are cool. That's what you get when you suspend powdered metal in oil. It gets even cooler when a computer pumps electricity through these pools in time with music. Check this out.

Courtesy of Engadget

Something stinks and it's not my feet

Some of you outside of Quebec probably don't know about some of the details of our recent provincial election. Many of my friends outside Quebec think that the majority of pure blood French Canadians are rednecks/racists. This isn't entirely true but unfortunately it hasn't been easy to defend the populace with articles like these dominating the headlines for the past few months. What is that all about? This article for those of you that don't speak French, points out how unacceptable some locals think that serving soup without ham and letting Muslims pray in a "Cabane a Sucre" is. This is an age old Quebec tradition, probably one of the most defining traditions of this society. Sure getting hosed in the woods while eating maple syrup on ham is a sacred ceremony but for fucks sake, getting infuriated when the tradition is flexed a little to accommodate others to me seems to be just plain racist and proves the point of those outside of Quebec who think QC-Francophones are just a bunch of backwoods yeehaws.

Unfortunately there's lots of this going around and the ADQ headed by Mario Dumont are front and center in the fight against diversity. I don't think that MD himself is originating this stuff but in the process of shamelessly riding the tide of anti-urban sentiment, this poor specimen has jumped on the bandwagon of rural angst and adopted some of its racist undertones.

This is especially sad considering that most of the areas that are really adamant about these policies have not a single visible minority. In the province of Quebec, the only place you'll see a minority is in Montreal yet the argument about Muslims, Sikhs and other such groups rages on not here but in small towns with nothing but pure white French people.

How sad, how embarrassing and how pathetic is this? The ironic thing is that the ADQ has quite a few immigrant candidates. Shame on them.

Aye Carumbu

Ouch!

Apple sauce

Dvorak thinks the iPhone is going to be a dud. Personally, I'm kind of torn. He's right in saying that competition between Motorola/Nokia/Samsung is going to squeeze the margins out of this segment but at the same time people really want their iThings and RIM is doing a great job at selling high margin gadgets without serious threat from M/N/S.

So what's it going to be for Apple? iTV and phone domination or is this their stumbling block? Steve's been a killer (in the execution sense) to date but he's got some serious obstacles in front of him with both these markets. There are no guaranteed slam dunks for sure but we're in for a wild ride. I have no predictions on this one but I think that Apple is going to do us all a favor by raising the bar for everyone else at a minimum.

Yes it's true

Yep.

Representation

There is something to be said about minority governments. On Monday, here in Quebec we will be faced with a provincial election. The results look quite polarized. Urban Montreal will vote Liberal, the countryside will vote ADQ and what's left of the hard line separatists will vote PQ. Most likely there will be a Liberal minority gov't and things will get pretty ugly in parliament during the next few years. This is good for all of us in a way because the ruling government can impose idiotic legislation that alienates a large section of the population without the support of an opposition party whos best interest it is to not let that happen.

Seems to have worked pretty well federally, turning the nasty ex-reform conservatives to warm fuzzy conserva-liberals. Lets see what Monday brings us.

Robots

Robots are very cool.

The War Zone Diary

I'm not sure if any of you saw Richard Engels "War Zone Diary" on MSNBC last night but if it you missed it and it does repeat you should most definitely check it out.

The thing that I realized the most from the show was that the violence that's sprung up in Iraq since the fall of Saddam is not really about the American presence. For sure it doesn't help but fifteen hundred years of Shia repression under a Suni minority was going to eventually boil over, it was just a matter of time. Without a strong man to hold it together, it finally has. The Americans should get out like yesterday, let the Iraqis, Iranians and everybody else duke it out and then eventually the place will partition itself off into a number of sectarian zones much like Serbia/Bosnia did back in the day. Things will get much uglier but it's better to just let it blow up now than to slow bleed over decades. Seems to me that the estimates of 100,000 dead civilians is pretty ugly in itself. It's just a number until you see a video of dozens of dead yellow/brown maggot covered corpses being stacked up every day.

Maybe I'm wrong 'cuz I'm a long long way from the action and I don't know a damn thing about these religious factions but the Americans just seem to be going in circles without any end in sight. Time to bail unless someone has a better idea.

Stryker et al.

Anybody that knows me knows that I'm not especially impressed with hippies. I don't think that they actually ever got anything done in the 60s and don't think that they had a positive impact in the years that followed. So even to my own surprise I can say that I've got a new soft spot for them today. Why pray tell do you ask? Simple, those guys all have bum hips and knees these days and are making me loads of money in Stryker, my favorite stock of the month. When the market started getting shakey a couple of weeks ago, I culled my dearly held favorites and moved into some defensive plays. Almost all of them have held ground and then some (GS, VRNT, SYK, PEP, PG). Phew.

On a different note, I'm not posting much because there's not much to say. The weather hasn't been too cooperative and I've been travelling and working too much to really do anything worth writing about. Just one of those periods I guess.

Lots of interesting stuff cooking but nothing that I can speak about just yet. See y'all later.

More cash from more chaos

The equities market has been a mess this past two weeks and I've managed to avoid a lot of pain with the following moves:

- Sold NTRI (+13%)
- Sold all tech except DIVX (-3%)
- Sold GS this morning at 205 (bought last week at 199)
- Last week bought into DIVX at $20 and VRNT at about $30 (up +1 to 3%)

So far I'm out of everything except VRNT, DIVX, TM, DEO, MPEL and a couple of agriculture and defence ETFs . I'm feeling a lot of pain on MPEL but I'm prolly going to double down as soon as it starts lifting again. I am now sitting at 65% cash. Overall, I'm still up a point since Jan 9th and I've got tons of upside coming on VRNT, DIVX & TM. Not so sure when DEO and MPEL are going to fly.

If things really crater this week I'm going to jump back in again.

There I am

Deepak Chopra once said "no matter where you go, there you are". There I was in the back hills of coastal Costa Rica last week wondering what the fuck I was doing there beating snakes and scorpions out of the underbrush in front of me. It definitely wasn't my typical tequila and beach break surf vacation. I went off to find a nice plot of land to call my own and eventually build a couple of villas or timeshare units with some surf buddies. Little did I know how hard I had to work and how tough a job it was going to be. In any case, I learnt a lot, didn't buy anything yet but did come to earn a great deal of appreciation for the locals and the feral settlers in Mal Pais and Santa Teresa.

It didn't help that the equities market was a roller coaster last week and my Internet access was umm.... well let me put it this way, the aboriginals prolly had better throughput way back when with smoke signals.

Lessons learned:
- Skype rules
- Love my TC1100
- GPS rocks
- Milagro golden brown Tequila kicks ass
- Don't mess with the stick bugs
- Construction is a pain especially from 3K miles away
- Hangovers dissipate quicker in the heat

So in the end, I didn't buy anything but I am in negotiations with some interesting deals. I'll keep you posted as things develop. Well that's not exactly true, I bought a scooter for nine hundred bucks but that's another story.

Cash from Chaos

Greetings from Costa Rica where I'm scoping out a real estate deal in Mal Pais. As it turns out, the day I spent travelling was the day that the stock market got hammered. Boy was I ever nervous, at 9:45 the market lost 4% and the Asian market had crashed. I thought that I was fucked.

As it turns out, I was smarter than I thought. I had sold off some inflated risky stuff last week (ICE, CHL) and bought into some beaten down bargains (VRNT) to soften my risk. I put in stop losses at 5% on the stuff that had high PEs and they all triggered by 9:45AM, 15 minutes in. All the other stuff didn't move much. So 2/3 of my portfolio was out or in a safe place. Today I bought a serious bargain (GS @199) and replaced my position in DIVX 2 bucks cheaper than I sold it yesterday. All in all, I was still up 2% and replaced my positions in a much better deal.

I'm not as dumb as I thought I was.

50 views of success

Check this out. I especially liked this one.

Not so quick Steve

Even though I dislike their products in a romper room/fischer price irritation kind of way, Apple has made me some money and lots of people like them. In turn I'd like to take this opportunity to thank Steve for lining my pockets and for all of you guys who own ipods for keeping their revs up.

Having said that, I'm not so sure anymore that the iPhone is going to be the slam dunk that a lot of people think it is. Here's why:

5) It's too expensive and Steve is a greedy pig that doesn't give stuff away
4) Cingular is the only US carrier
3) It's a closed system and the other carriers will be really pissed about not getting a good cut of the revenues and won't be able to push their own music stores
2) There's going to be a bunch of stuff coming from LG, Motorola and Nokia that does the same stuff and flash memory/lcd prices are plummeting so fat margins will be gone
1) NVidia and Marvel have killer chips that they will license to everybody that does stuff like the proto phone below



I'm not saying that it's going to fail but it's not a slam dunk just yet.