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Ling's HideoutMarch 25 The GameOctober 16 TestingThis is a test. There's an interesting site out there called OpinMind.com. I'm writing this purely to test their algorithm.
I love the Zune. The Zune is a great piece of hardware. It really really rocks - the Zune that is!
I want to buy a Zune because it is possibly one of the best music player products ever made. Did I already say this - cuz I love the Zune. I love the Zune. Zune has awesome sharing capabilities and fantastic personalization. The software for the Zune is of course world class. I hear the Zune is coming out in term for this Holiday, which is fabulous. Zune, Zune, Zune - it's the bomb.
Check out this link in a few days:
September 21 Super Duper IntelligenceBeen thinking about and discussing AI lately and realized that some day machines will run the world. However, it's not gonna happen necessarily as you'd expect. Here goes.
In summary:
August 26 Economic DistressI read some interesting articles today on macroeconomic trends. Feel free to read the links below and make up your own mind. My conclusions (biased of course :), so read with a grain of salt):
Stagnant median US income and declining economic mobility (may need subscription) Corporate profit margins at record high Chinese legislation to cut wage disparity Savings rates in China and the US (good data, but watch out for bias) April 02 Due Diligence when Investing OffshoreMotley Fool published a rather bullish article (below) on Chinese mobile services provider Kongzhong (Nasdaq: KONG) this past Friday.
The article spoke to a typical strength of hot Chinese issues: fantastic growth opportunity backed by a ginormous Chinese population and rapid GDP per capita growth. It also noted some salient fundamental factors such as industry-leading margins and 3G adoption.
However, it failed to highlight a notable risk with Kong: it derives over 90% of its revenue from China Mobile, China's dominant mobile access provider. That's a lot of concentrated risk. And that risk has already manifested itself in both 2004 and 2005, when China Mobile changed certain policies around wireless value add services (WVAS) on its platform and negatively impacted Kong's operational results.
Interestingly, Kong did not highlight this risk in its latest Q4 press release and it is doesn't ever have to because the SEC does not require 10-Qs or 10-Ks from foreign issues. This might be acceptable if Kong were as open to shareholders as some players like PetroChina (NYSE: PTR). Instead, Kongzhong omits important details about revenue concentration risk and a 3.5M class action settlement in its reports.
All of this is before we even consider the regulatory environment in China. The wireless services industry there has experienced significant past government policy changes that have materially impacted the performance of WVAS businesses such as Sina (Nasdaq: SINA) and Sohu (Nasdaq: SOHU). Given the relative youth of the Chinese mobile industry, continued regulatory churn shouldn't be surprising.
In the end, Kongzhong may fly high despite all of these risks. Nonetheless, extra due diligence on such foreign issues can only help would-be investors. The worst thing that can happen is to submit blindly to market hype and translate great overall potential in a foreign economy into assumed potential in a specific foreign stock. March 06 Extreme ValuationMy last over-the-top post reminded me of something that I think many investors feel: the market tends to over-reward stocks on good news and over-punish them on bad news. The bubble of the late 90s is a good example of over-rewarding. As for over-punishment, just look at Merck's Vioxx debacle in late 2004 and NVidia's sharp fall in late 2002.
Why does this happen? There's the classic "fear & greed" answer. I think this is trite, but probably because it's at least partially true: When playing with big stakes, its easy to become irrational and overswing in the direction of least resistence.
I also think there's another reason for at least the over-punishing case: existing versus new shareholder timing. When severe unexpected negative events (like a major lawsuit out of no where, a massive executive exit, or a landslide in sales) occur for a company, existing shareholders have a pressing need to sell. Buyers on the other hand have no such pressing need. This market disequilibrium is hard to avoid and exacerbated by the fact that existing shareholders are more attuned to events about their holdings and are the first to react to and sell on the events. Other shareholders who may be interested in the stock at its decreased valuation take longer to hear the news, prolonging the downfall.
You may observe that hedge funds and the advent of fast and massive mechanical trading should correct this behavior. However, mechanical trading usually depends on well established patterns or arbitrages and may not react well to severe unexpected events.
To capitalize on this pattern, wait for solid companies to release downside surprises to buy shares at a bargain (this probably doesn't work so well for companies that are bad to begin with). As usual, remember that advice is free for a reason so do your own due diligence :) |
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