In the 19th century, economists came up with the concept "natural monopoly" to describe railroads. It's so expensive to build a railroad between two cities, that it was prohibitively expensive to have more than one company build a line.
Somewhere down in the nodes, whether it be 10nm or 7nm, it will be too expensive to have more than one company pursue Moore's Law. There won't be enough revenues and profits in the entire world of semiconductors to fund two separate nodelines. We could end up with a natural monopoly if the public-at-large believes that the pursuit of Moore's Law is more important than a competitive environment.
I wonder what the Mexico operations of EZPW would be worth as a separate entity if you applied the multiples granted to FCFS?
Well, I just want to say thanks to my many fans on this message board. Your applause kept me going, kept me buying.
There is one point I want to make today : Image is not arithmetic, but progresses logarithmically on a base 10 scale just like earthquakes.
An earthquake measuring 5 on the Richter Scale is 10X the shaking power of a 4.0 earthquake. So too, a company that is a world leader in 2 segments is 10X the shaking power of a company which leads in 1 segment.
And if IVAC can complete the Triple Crown and become a world leader in Solar Deposition, then they will be 100X in their shaking power because of image. Image is that intangible quality which draws the interest of others. It's charisma, and corporations can have it just like people.
Up until this year, IVAC employees were Big Iron Jockeys making Big Stuff (Lean 200s) that made possible all of the platters holding about 70% of all the world's information. Not a bad place to be, but image-wise they blend into the wallpaper at any social gathering. They're tall, but that's it.
Today, you can add their world leadership position in Photonics. They are the sole supplier of digital low-light sensors to the U.S. military. Whoever rules the Night, rules the Battlefield and therefore rules the World. "In the country of the blind, the one-eyed man is king." So said H.G. Wells.
That makes IVAC not only Tall, but Dark.
If they conquer their particular niche in Solar they will be Tall, Dark, and Handsome. Their image will be miles above where they are today and that will draw to them a shareprice which is IRRATIONALLY HIGH. The goal is not to reach fair value, but to supercede it by many lengths. That takes image, and not just growth and fundamentals. I believe their image is about to skyrocket. Elon Musk writ large (but they must complete the third leg to get that 100X factor.)
To be honest, my put profits in ARMH owe much more to Ashraf than Wallis, but the two of them were more on the same page mid-year when I purchased the puts. Ashraf wrote some great articles on SA which recommended shorting ARMH.
I bought 60 contracts of Jan. 18, 2014 ARMH puts, strike $45 on May 1st and 2nd for about $4.01.
I sold those 60 contracts on June 21st at $10.86. Almost a triple.
Both Wallis and Ashraf are very helpful in understanding Intel.
Wallis and Ashraf,
It's the friction that causes the sparks. It's like watching Kirk and Spock. Stupendously informative and entertaining. Both of you are first class.
Hey, the call options (Jan 14, $25 strike) I purchased after the Investors' Day blowdown are now up 100% (from 36 cents to 72 cents). I just sold them. My long shares remain untouchable until $40.
At one point, they were down 50% but the to-and-fro between the two of you helped to clarify some issues and stay the course.
Keep up the lively banter. We all benefit from it.
" How do you find this stuff?"
Besides the usual googling, the greenie websites offer a great deal of information. I'm always looking fpr trends and events that upset them. And if someone is a greenie, they have plenty to be upset over. Some greenies classify themselves as NTE or Near-Term-Extinctionist. The battle is over. The planet has lost. Nature bats last.
For instance, thinkprogress is upset with the NYT for dropping their "green blog" and that the paper's climate change coverage has dropped significantly. Did you know that? I sure didn't until thinkprogress pointed it out that coverage has dropped by a third. On top of that thinkprogress is royally upset that the NYT is providing Bjorn Lombor space to say this:
"There’s a lot of hand-wringing about our warming planet, but billions of people face a more immediate problem: They are desperately poor, and many cook and heat their homes using open fires or leaky stoves that burn dirty fuels like wood, dung, crop waste and coal. About 3.5 million of them die prematurely each year as a result of breathing the polluted air inside their homes — about 200,000 more than the number who die prematurely each year from breathing polluted air outside….
"Even more people — an estimated three billion — still cook and heat their homes using open fires and leaky stoves."
The greenie websites are fountains of information. You just have to reverse-image their interpretation to realize that coal is on the comeback trail. Even the NY Times is starting to move on to other issues.
I just finished listening to the presentation.
I thought Skaugen did a great job explaining how Intel can still thrive in a market although it is late to that market. Reminds me of a tank video game where the player can choose a lightweight tank that moves fast but sacrifices armor and firepower or you can choose a heavy duty tank that moves slowly but once it has enjoined battle has advantages due to heavy armor and firepower.
December 5, 2013
"Ukraine has signed a long-expected deal to cooperate with China on constructing an energy plant to convert coal into synthetic natural gas, RIA Novosti said. The project will allow about 4 billion cubic meters of natural gas to be replaced annually with the synthetic coal-based product, Ukraine’s Energy Ministry said in a statement Thursday, December 5.
"The statement said the plant would provide a market for the production of 10 million tons of coal annually and create over 2,000 jobs. Ukraine’s state gas and oil company Naftogaz signed a $3.7 billion credit agreement last year with China’s state-owned Development Bank to finance the program."
"China’s National Chemical Engineering contractor and its subsidiary, Wuhuan Engineering, will provide Ukraine with the technology to build the plant. Synthetic gas production is a multibillion-dollar pollution-reduction project in China, which as of September had approved 18 of its own plants capable of producing 75 billion cubic meters of gas annually, according to the World Resources Institute.
"The idea has drawn criticism from environmentalists, however, who say the amount of greenhouse gases produced in the conversion process could accelerate climate change. Synthetic gas is a cheap energy alternative for Ukraine, which is desperately trying to cut its dependence on costly Russian natural gas."
My comment: Synthetic coal gas replaces natural gas. What a dilemma for environmentalists! By blocking the exporting of LNG from the U.S., they keep worldwide NG prices at very high levels which leads to switching to coal. On the other hand, if LNG exports from the U.S. are expanded, that puts pressure on U.S. NG prices and leads to coal switching domestically. Furthermore, the World Bank new policy of not funding coal projects is handing over power to China's Development Bank as the go-to partner for economic growth. Hey, it's cold outside. Brrrrrrrr.
I was surprised to hear the term "Tender Offer" mentioned as a possibility by Jeff Andreson in the latest presentation. The company making a tender offer for shares is the highest form of buyback. It indicates they want to buy a significant number of shares while the company is so cheap.
IVAC is sending a signal. They don't need to hold onto so much cash because they see cashflow coming in the near future.
I like the way this management team approaches business.
This news came out today:
" Coal stocks move as EPA promises flexibility on carbon standards
"The late-day rise in coal stocks (KOL) is attributed to comments by the EPA's Gina McCarthy that the agency would give states "significant flexibility" in meeting carbon emission requirements from power plants; the EPA will propose the standards next June, McCarthy says.
Analysts say such flexibility would be especially positive for James River Coal (JRCC +9.7%), whose shares momentarily popped 25% before calming down a bit.
Also: ACI +3%, ANR +1.4%, BTU +0.6%, WLT +1.3%, CNX +1.6%, CLD +0.8%, ARLP -0.2%."
From The Milwaukee Journal, Oct. 20, 1959
The "Ask Andy" column
(Andy sends a complete, 15 volume set of Compton's "Pictured Encyclopedia" to Ginny Huddleston, 12, of Jacungie, Pa., for her question:)
"How Can a Tree Grow Out of a Rock?"
"We all know a tree needs to have its roots deep in the soil which gives it nourishment, so it is always a surprise to see a tree growing from the middle of a solid boulder. This is not a trick of the eye, but when we examine more closely we find that things are not quite as they seem to be. All trees need soil to nourish them and this little tree is no exception."
Am I exaggerating, or undergerating? I am at one with the Universal Mind. The vision is clear ...
Right now, Blonigan is sweating. He knows the company is underpriced and subject to a predatory buyout.
He is sending out flares to any and all shareholders, small or large, who will lend a helping hand to keep IVAC in control of its own destiny. The price needs to go higher so that IVAC will maintain independence until it reaches 2015 when the ExaFlood hits and Lean 200s start flying out the door.
I have a couple of posts that detail the value of photonics and these are particular relevant since IVAC once before sold their nightvision technology to Litton when it was analog. Let me give you the Big Picture regarding Photonics;.
Today, Photonics is in better situation to succeed than ever before with $31 million in 2013 revenues and growth of 20+% for 2014 and beyond, a backlog of $51 million, and most significantly --- THE WORLD's ONLY LOWLIGHT DIGITIAL SENSOR.
The real kicker is that the U.S. military is dedicating itself to nightvision as a crucial differentiator and strategic technology. The Army has adopted the slogan "We Own The Night". It's that commitment which pushes Photonics into a division worth AT LEAST $100 million.
Nightvision capability is the 21st century version of the stirrup which made the Mongols the invincible army of their time.
"Nevertheless, no one disputes that the stirrup as a weapon was a brutally effective harvester of souls that gave its wielders an unmatched technical advantage in battle for almost a millennium from 300 AD. The stirrup-less were engulfed in a seemingly unstoppable onslaught that left them facing a simple choice: adopt the stirrup or be exterminated."
Nightvision is no longer staring through a tube with 40 degrees of visibility at blurry green images, but single or multiple cameras that feed into a helmet with video stitching and create a 180 degree panorama with digital overlays (terminator vision) and images of much greater clarity.
This key military technology is based on Intevac's low-light digital sensor and NO ONE ELSE has it. It is a superweapon. The U.S. Military controls who IVAC can sell these sensors to, and most certainly controls who could be a potential acquirer of the division. If there were no such restrictions, and IVAC could sell their Photonics to the Chinese or the Russsians or the Iranians, then this division would sell for multiples of $100 million.
Hey guys, I appreciate the appreciation.
If you want a laugh, go check out the lead story on Huffington Post.
Cows have been lying to us, and it may mean the end of the world. HaHa.
"WASHINGTON (AP) — The United States is spewing 50 percent more methane — a potent heat-trapping gas — than the federal government estimates, a new comprehensive scientific study says. Much of it is coming from just three states: Texas, Oklahoma and Kansas.
That means methane may be a bigger global warming issue than thought, scientists say. Methane is 21 times more potent at trapping heat than carbon dioxide, the most abundant global warming gas, although it doesn't stay in the air as long.
Much of that extra methane, also called natural gas, seems to be coming from livestock, including manure, belches, and flatulence, as well as leaks from refining and drilling for oil and gas, the study says. It was published Monday in the Proceedings of the National Academy of Science."
"Cows seem to be spewing twice the methane that scientists previously thought, Michalak said."
From The Financial Express:
"While the government tries to deal with Coal India Limited’s (CIL) unions’ opposition to divesting a mere 5% of its shareholding in the PSU, it has far larger battles to fight. As a result of CIL’s inefficiencies, India already imports 19% of its coal requirements and this is projected to rise to 27% in a business-as-usual scenario by as early as FY17, according to a consulting paper done by Metis Energy for Ficci. In other words, that’s a critical import dependence and, apart from the significantly higher global prices, this also chokes up India’s ports. Another issue that needs considering is that, in 2007 this was pointed out by the TL Sankar committee, CIL does not have the expertise to mine at more than 200 metres for open-cast projects and 350-400 metres for underground mining while the norm in the US and Europe is 1,800 metres."
My comment: The coal time bomb keeps on ticking. China has provided the business model for moving an agrarian society into the industrial/information age based on cheap coal energy. The greenies are inadvertently helping coal bulls, by actively opposing coal development and increasing the value of the coal infrastructure which is already in place. Greenpeace is doing everything in its power to make sure India will not develop the Carmichael Mine in Australia. "Carmichael mine scheme is "uncommercial", according to a report by the Institute for Energy Economics and Financial Analysis commissioned by the environmental group." This is a new tactic, hiring an outfit to show that a coal project is unfeasible in order to scare away necessary investment.
Thanks for this post. I'm reminded of Nokia. People said, "We love Nokia hardware. Symbian, not so much. Wouldn't it be great to see Android on a Nokia device." But instead, Nokia entangled itself with Stephen Elop and Microsoft. Nokia became a chalk outline at a murder scene. It was tragic.
A month ago, I found it disturbing to read Russ Fisher's opinion of Windows 8 ----
"The next speed bump for Intel will be negotiating the Windows 8 debacle. I gave up and am having Win8 ripped out and Win7 installed in my new computer. I am so frustrated by Win8 that the very sight of the "Metro" screen elicits a feeling of outrage that I have never felt before. Some smart and tech savvy friends have made comments such as, "Windows 8 almost brought me to my knees", "When I tried Windows 8 I thought I had a stroke, because I couldn't do anything", "It was like tipping over a mechanics tool box on a freeway, you have to dash out and pick up a tool in full traffic" What was Microsoft (MSFT) thinking? Paul Ottelini was right when he said that Windows 8 was "not ready". I think it is an unmitigated disaster. It couldn't be worse if Microsoft had contracted Apple to write Win8 for them."
So, this new openess to work with Android might put a fire under Microsoft to get it right.
Pure panic in the call options market. 60% down on Jan 14 calls in one day.
I believe it is a complete steal and couldn't pass it up.
Just to highlight the volatility of options, yesterday afternoon I sold the $25 strike price, Jan 14 call options for 91 cents.
Today, those same options are trading at 36 cents.
I am sorely tempted to re-establish a position. I don't think the guidance was a betrayal. The only responsible guidance is to not include any possible positive impact from newly announced programs. Guidance shouldn't be guesswork. So, you end up with guidance which incorporates all of the negative trends which are known and somewhat predictable, but leaves off potential positives deriving from what is new and therefore unknown.
... the last thing I want is ---
"Intevac, Inc. (IVAC) announced today that its Board of Directors has authorized the repurchase of $30 million of the company's common stock. Effective immediately, the Repurchase Program will begin to be implemented in the current quarter."
You see, I want to buy shares at the cheapest possible price. With a buyback, the company will be blundering in and raising the price of the stock.
On the other hand, Blonigan is right to buy back stock. It is incredibly cheap considering that the Photonics Division all by itself is worth $100 million and the stock is only trading $45 million above the cash.
In my latest book, "Relax, It's Only the Apocalypse," I describe how all three of IVAC's division will be haymakers in the coming years.
The future will be filled with Virtual Memory Castles and Solar Powered Enclaves for the wealthy and marauders armed with night vision goggles. Perilous times, indeed.