Tuesday, April 23, 2013

Gulf Keystone share transfer

First - a recent release from Gulf Keystone Petroleum concerning the CEO - Mr Todd F Kozel disposing of 10 million shares - the bulk of his holding:

Director's Shareholdings

Gulf Keystone was informed on 19 April 2013 by Mr Todd F Kozel ("Mr Kozel"), Executive Chairman and Chief Executive Officer of the Company, that on 19 April 2013 he transferred ten million (10,000,000) common shares of USD 0.01 in the Company to a third party, in respect of a repayment in full under a financing arrangement, at a price of £1.6875 per share.  Mr Kozel no longer has any interest in the common shares transferred.  Mr Kozel has no present intention of disposing of the balance of his common shares.

As a result of the transfer of common shares, Mr Kozel now holds:

Common shares held directly
Interests in common shares held subject to the discretion of the EBT Trustee
% of enlarged issued share capital
Number of options over common shares under the Share Option Plan
Todd Kozel

Second - An old video of Todd Kozel being interviewed on CNBC Europe.


No further comment.


Bedtime reading

I am about to lie on the couch at work with the main light off, a lamp behind me and a blanket on.

I plan on reading AT&Ts annual report cover to cover. We own the stock.

I hope not to fall asleep.

Being a hedge fund manager is not entirely glamorous.


Friday, April 19, 2013

Scared - Verizon, Vodafone

Few things scare me more than Vodafone management selling their one good asset (the stake in Verizon wireless) to waste in their usual manner (see Australia). By far the best asset owned by Vodafone is the one asset they do not manage - and there is a (management) reason for this.

But there was an a quote in yesterday's Verizon conference call that was somewhat contrary to my prior opinion...
With respect to Vodafone, obviously, we made a public announcement on April 2, and I would reference all of you back to that announcement. Of course, as we've always said before, we are very interested in acquiring the 45% stake in Verizon Wireless that we don't already own. I will say, though, that there has been a lot of speculation about the tax consequences of a purchase of this 45%, and we are extremely confident that such a transaction could be accomplished in a manner that is very tax-efficient and would not result in a tax on the gain in that stake. So beyond that, I don't think there is really much else to say. So with that, I will pass it on to the next question.
I am worried that Vodafone will take the money. Very worried.


Thursday, April 18, 2013

Speculating about the future of Apple in China

This post is a speculation from my experience of an Android phone I think from Saudi Arabia.

I am speculating that Apple is going to have a much tougher time in China than anyone imagines.

To see why you need to go back to my original Samsung Desire HD - which I blogged about in June 2011.

I purchased this phone on Ebay and it came shiny and new in a white box, however the operating system was dodgy. It had a limited choice of language - Arabic, English (UK), Farsi, Urdu.

Most importantly it did not contain any access to the Google market place (Google's equivalent of the App store). It had limited apps and no possibility of adding more. It contained a non-standard web browser and a non-standard email client (leaving open the possibility of the State watching what I wrote and said). It was not possible to put a Voice over IP app on it. That phone was almost useless - a smartphone without apps. The smartphone of an oppressive regime.

The solution was to root it and load something great (insanely great even). I loved that phone until my wife put it through the washing machine.

Saudi Arabia (or whatever Middle East state it was) could demand smart-phones that were neutered because - well - they had a copy of the source code for Android and could demand and implement any changes they liked. Open source is a force for good or evil and in this case it was evil. Google could distribute "good Android" and the oppressive authorities could force their phone companies to distribute "bad Android". There will always be an elite who can root their phone and load CyanogenMod or similar - but that will be an elite.

Will this be the oppressive phone of China?

My guess is that will suit China just fine. The phone companies are controlled by the State and they will sell handsets controlled by the State.

You can't really do that with Apple. Apple is not open source and there is no root operating system that an oppressive state can modify to suit their whims. So the State needs to lean on Apple to do their evil work for them - and that doesn't work brilliantly. Apple is not going to give away its secrets and the Chinese state will demand more and more.


So I am assuming that if Apple goes mass-market in China it will sell systems with enough "apologies" to the cultural differences of China. Those "apologies" will make a rooted Android massively superior to a botched-up Apple. The elite will want their Samsungs... Some bulls on Apple and China may be just flat wrong...

Just a speculation...


Postscript. The WSJ comes to a similar conclusion.... The key observation - Android in China comes without an App Store as per my Saudi phone... Here is the quote:

Ironically, Google's Android mobile operating system dominates the smartphone market in China, despite the company's strained relationship with the government. But those devices don't come with Google services that are standard elsewhere, such as YouTube, search, and Google Maps. Also, without access to the Google Play store, Chinese users have a weaker selection of apps to choose from.

Wednesday, April 17, 2013

Mt Gox, bitcoin, Hordes of Chaos, Demons and armies of Orcs...

MtGox.com is the main exchange for bitcoin. I am not inherently opposed to bitcoin as a small and interesting speculation (though I would not do it for my clients). I think bitcoin probably goes to zero - but only probably...

If you want to understand bitcoin the best explanation I have found is on the self-evident blog...

However it is the history of MtGox - that amuses me...

MtGox started as an exchange for trading cards in a fantasy role playing game. It stands for Magic The Gathering Online Exchange.

But between trading playing cards and trading encrypted tokens certified with a file-shared registry it distributed an online game called "The Far Wilds". Archive.org preserves some of the website:

The Far Wilds is a unique turn based strategy game. Configure an army and fight on a random battlefield. 
Battles are dynamic. You must adapt your strategy to different battlefields conditions and opponents.... 
The Celestial Imperium moves out toward the northern wastes to respond to the rising tide of the Hordes of Chaos. Disciplined and Powerful Psions wield their minds against twisted Mutants. Priests and Paladins of Xosa battle with Demons and armies of Orcs across the wilderness of the Borderlands.


Tuesday, April 9, 2013

Monday, April 8, 2013

Apology to CUPID PLC

Dear readers of my blog

Following correspondence received from Cupid plc's solicitors, I have removed recent blogs concerning Cupid from my website. I apologise for any factual inaccuracies contained within those blogs and I wish Cupid good fortune in its future endeavours.

John Hempton


I do not do links much - let alone non-finance links. However like much of the financial world I am wondering whether Johnson can transform JC Penney before he has no liquidity left to play with. The financials are a train-wreck. But leaving a third tier retailer alone in America is also a near-guaranteed train wreck - if you left JCP untouched it would slide from irrelevance to bankruptcy over maybe a decade.

The turnaround logic looks from the outside like:

We must do something.
This is something.
Therefore we must do it.

The link below is a nuanced fashion-based examination of this issue.




PS - The link to this article in Vogue is worth the price of admission ... http://www.vogue.com/vogue-daily/article/what-price-glory-jcpenney/#1

Saturday, April 6, 2013

The HP Board Changes

I want to make a comment on the HP Board changes of today. I do not know how the HP Board missed the Autonomy fraud. It puzzles me because 

(a). Autonomy accounts were superficially funky (for instance receivables were over double unearned income in a software firm),

(b). some of the press - particularly FTAlphaville (by far the best finance blog at any newspaper) were persistently but gently skeptical of Autonomy and 

(c). several short sellers (most notably Jim Chanos) were all over it.

If I were forced to blame anyone it would have been Ken Thomson - the former Wachovia/First Union chairman because Thomson over all other board members he should have had the skills to pick up the accounting fraud by noticing the superficially funky accounts. [Not everyone on a board should have those accounting skills. Some for instance are highly skilled in some aspects of technology or staff management or any of the other myriad skills a board needs.]

But that is not why I am writing. I am not in any way privy to the board discussion of Autonomy and I do not understand how the mistake was made. And it is not for me to speculate really...

I am writing to praise the departing Ray Lane.

Over the years I have written to several companies (at least a dozen) to ask/query/complain or speculate about funky things in accounts. The reaction is often hostile and usually the more hostile and the less transparent the worse the situation is. Sometimes there is some smoke and some fire but not quite in the form I surmised. [This is a problem with misleading disclosure. When disclosure is misleading you can often accurately surmise things are not right and not as they seem and be totally wrong when you take a guess at the underlying reality...]

HP however was by far the most transparent company I have ever speculated about. I wrote them a fairly aggressive letter and discussed it a little on the blog. 

I was wrong. Flat wrong in my speculations. That will happen.

However the process set in place by Ray Lane in response to my original letter was exemplary. It was transparent, thorough and efficient.

The HP board may have got many things wrong - but in my only substantial contact with them they were way better than many. 

Just saying.


Wednesday, April 3, 2013

Cupid's profile count

This post has been removed an an apology can be found here.

I apologize to my readers for any inconvenience.


Tuesday, April 2, 2013

Cupid PLC's strange balance sheet

This post has been removed an an apology can be found here.

I apologize to my readers for any inconvenience.


Monday, April 1, 2013

Wondering whether the social sciences are forever stuffed

(Warning: this post is written after a glass or two of wine and is about the things that concern me after a glass or two of wine. It is not about investment.)

Brian Cox (read one of his books if you want some light amusement) pointed me (via Twitter) to this abominable article in the The Times Higher Education Supplement. It is quoting an Belfast Professor arguing for a "values based" higher education in the social sciences. To quote:
“At the back of all this is my vision for the public responsibility of social science: we’re about educating global citizens for the 21st century, not just factory-like graduates with their 2:1s,” Professor Brewer said. “It’s about inculcating within our students a set of values, an attitude towards others, that realises the public value.”
The Professor (John Brewer) is aware of the obvious criticism... to quote the Times article...

Although he is well aware that many people would like to remove all talk of “values” from the social sciences, Professor Brewer said he sees himself instead in the tradition of 18th-century Scottish moralists such as Adam Smith and David Hume - “the cohort of people who gave us social science in the first place as it grew out of moral philosophy. They did not see any incompatibility between their practice as scientists and their argument that society was based on values.”
Professor Brewer tells us that David Hume - of all people - did not see any incompatibility with his practice as scientists and his argument that society was based on values. Well - only if you ignore the fact that he wrestled with it extensively. This is probably the single most famous paragraph ever written by David Hume:
“In every system of morality, which I have hitherto met with, I have always remark’d, that the author proceeds for some time in the ordinary way of reasoning, and establishes the being of a God, or makes observations concerning human affairs; when of a sudden I am surpriz’d to find, that instead of the usual copulations of propositions, is, and is not, I meet with no proposition that is not connected with an ought, or an ought not. This change is imperceptible; but is, however, of the last consequence. For as this ought, or ought not, expresses some new relation or affirmation,’tis necessary that it shou’d be observ’d and explain’d; and at the same time that a reason should be given, for what seems altogether inconceivable, how this new relation can be a deduction from others, which are entirely different from it … [I] am persuaded, that a small attention [to this point] wou’d subvert all the vulgar systems of morality, and let us see, that the distinction of vice and virtue is not founded merely on the relations of objects, nor is perceiv’d by reason.”
Hume here is quoted as "the distinction of vice and virtue is not founded merely on the relationship of objects, nor is it perceiv'd by reason".

Hume had plenty of ideas of where morality comes from but they were incompatible with the practice of a scientist no matter what John Brewer says.

John Brewer - and his attitudes - are precisely what make the social sciences useless. The social sciences can work on some entirely useful facts - and these facts can inform decision making independent of values. Try these for size for recent important arguments:

(a). Did Saddam Hussein in any way contribute to the 9/11 events.

(b). Does the Chinese political system preclude any deal including China on global warming? If so what deal?

(c). Would further regulation of semi-automatic weapons in the US actually reduce the chance of a Sandy Hook like event or are the guns irrevocably in circulation such that this regulation would not make people safer.

(d). Would a three trillion dollar expansion in the US Government debt funded entirely by expanding the balance sheet of the Federal Reserve increase inflation substantially? If so by how much?

(e). Would reducing the penalty for illegal drugs - especially cocaine - reduce violence in Mexico and ultimately would it reduce the illegal immigration pressure on the US-Mexico boarder?

All of these are questions that might concern social scientists (including economists) and in every case people who start with prior ideological commitment (an "ought statement") to one or other position disqualify themselves from the debate. If you don't start by thinking you might be wrong you are far more likely to be wrong. Being guided here by ideology (or the belief in God or John Brewer's values) will make you intellectually useless. Whether printing more money (d) increases inflation is a simple fact - and if you thought it did you might have made your bet and lost considerably...

But hey then - I should not be concerned about a(nother) generation of intellectually useless social scientists and mad classics professors coming out of the British schools. The people who think that Ernest Rutherford was not an intellectual make great trading counter-parties. The best people to trade against are people who do not devise tests for their ideas - whether the tests are as simple as chatting to a few Herbalife distributors or putting a profile up on a Cupid PLC owned dating site.

So - selfishly - I want to wish John Brewer and his ilk the best at destroying the minds of a generation. I only wish he taught at Oxbridge or Harvard (not some Belfast school) as it seems to be Oxbridge and Harvard types I trade against.


General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author.  In particular this blog is not directed for investment purposes at US Persons.