Thursday, December 31, 2015

The Haiku of Finance for 12/31/15

Another year gone
Wall Street did not learn a thing
Get dumber next year

No One Learned Anything In 2015

Wall Street closed out another year with nonsense galore. The DJIA went nowhere for 2015 and even closed down today. You can be sure that some salesperson somewhere will pitch this as a buying opportunity in 2016. I won't pitch anything at all. Reviewing the year's action doesn't uncover much that anyone could sensibly pitch.

Stocks, bonds, and real estate remain severely overvalued worldwide. No one has to take my word for it. Anyone with a junior high school reading level can review reports from the Bank of International Settlements on how public market valuations have come uncoupled from macroeconomic reality. Hardly any professional portfolio managers will take those high-level warnings seriously.

Consider this the year-in-review from Alfidi Capital. There isn't much I can say here that I haven't been saying for the past several years. Mean reversions across multiple asset classes and geographies are long overdue. Predicting the timing is a waste of effort. Knowing the likely scale and consequences of the correction is more productive. Contrarians made fortunes in the Great Depression and 2008 financial crisis by preparing in advance and staying away from inflated risks. I am ready to watch Wall Street learn its hard lessons in 2016.

Wednesday, December 30, 2015

The Haiku of Finance for 12/30/15

Find a tax donkey
Load it with costly burdens
Bound for Bermuda

Financial Sarcasm Roundup for 12/30/15

Social media users often tempt me to follow them down endless rabbit holes of replies. That is not how I prefer to spend my time. I would rather use my hours wisely in the pursuit of sarcasm.

The SEC's report on last August's volatility spike is out. It should have taken the SEC weeks, not months, to produce this report and it doesn't even draw any conclusions. A bunch of people at the SEC must be very concerned about how any hard evidence of malfunctioning markets would make them look bad or endanger their prospects with future employment on Wall Street. Fund managers are becoming very concerned about how liquidity interruptions in the bond market can trigger illiquidity in equity markets. They worry about being forced to sell stocks just to pay for bond fund redemptions. The SEC doesn't even get that the trading halts triggered in August can cause such illiquidity. We're sleepwalking into another market crisis and the SEC has no idea how to untangle its vine jungle of trading rules.

The wealthiest Americans have created their own private tax system. Affluenza has replaced civic obligation as the defining characteristic of this country's ruling elite. Rich people who claim they are willing to pay more in taxes aren't serious. Their claims are a stalking horse for increasing the burden on "tax donkeys" in the upper middle class of professionals who could displace them. I'll bet Bermuda is really nice this time of year. I wouldn't go there for vacation because these "income defense" people would just shoo me away. They don't even realize that they are the intended targets of their super-rich masters' desire to push the income tax burden downwards.

Bridgestone will allow Carl Icahn to walk away with Pep Boys. I think this deal is a play on the sharing economy for cars. Think about how car-sharing services will eventually hurt sales of new cars to Millennials who can't afford to drive anyway. Car-sharing services will still have cars on the road, driving constantly. Those cars will have to last longer and will need constant maintenance. Auto parts and services will always be in demand, even if corporations own most of the cars. Lots of aspiring Uber drivers can switch to jobs stocking parts at Pep Boys once Uber starts buying self-driving cars.

Let me get back to Bermuda as a tax haven. I don't see why Congress doesn't grant the same preferred status to Puerto Rico. Just think of all the professional income defenders who could then set up shop on that poverty-stricken island and help alleviate its insolvency. I guess the ultra-rich prefer to confine their tax donkeys to the same island where they take vacations, just to push them around in person. No one pushes me around. I'm a CEO, in case anyone forgets.

Monday, December 28, 2015

The Haiku of Finance for 12/28/15

Many skin treatments
Generics have it covered
Crowded drug market

BioPharmX Losing Even More Money in 2015

BioPharmX (ticker BPMX) is another small pharmaceutical company with big plans to shake up drug delivery in dermatology and women's health. Plans are one thing, operations are another. Talented management teams are supposed to translate strategic plans into operational success.

The company's management backgrounds make me wonder whether the right people are in the right positions. The current CEO and president both have very diverse backgrounds helping other tech-related companies, but growing a young drug company demands years of drug-specific focus. Their SVP for marketing has worked in plenty of sectors except drugs. I am used to seeing such oddly diverse backgrounds in small-cap mining companies that have trouble developing a viable project, but it is disappointing to see such a mix in a drug company.

Their primary products, according to the company's website, are a topical antibiotic for acne and an iodine tablet for treating fibrocystic breast condition. Knowing the market opportunity should matter for investors. IBISWorld's market research report from February 2015 puts the size of the acne treatment market at $644M, with up to 50M Americans afflicted. GMR Data puts the market size higher at $3.1B for the same population. Divide the market size by the number of patients to get an average annual spend per person. MPR lists the leading anti-acne formulations and their doses. The many treatments available make for a saturated market. Fibrocystic breast condition is a mildly discomforting condition, according to searches with WebMD and the Mayo Clinic. The condition is so inconsequential it typically doesn't even require treatment unless a cyst becomes a marker for cancer.

BioPharmX's BPX01 anti-acne treatment is still in its clinical stage, so it's impossible to know its retail price point in a market crowded with generics. The company's BPX03 for breast pain must compete directly with very cheap OTC pain relievers. New drugs treating common symptoms already covered by cheap treatments are usually redundant unless they offer massive improvements.

Read the 10-Q dated December 15, 2015. BioPharmX had US$2.2M in cash on hand on October 31 and a net loss of -$11M for the prior nine months. The company must raise significant new capital frequently just to survive with that kind of burn rate, so investors can expect continued dilution. The stock market reacted to the company's December 14 "breakthrough" announcement, and then drove the share price back down in the weeks since then. The press release describing the BPX01 research results doesn't reveal much useful information.

BioPharmX had a very unprofitable 2015 even after ramping up SGA expenses. They also lost money in the prior two years. A drug company whose ability to deliver a quality product is largely unknown must rely on some compelling "story" of unmet market needs and past management successes. The BioPharmX story needs a better second chapter.

Full disclosure: No position in BPMX at this time.

Sunday, December 27, 2015

The Limerick of Finance for 12/27/15

Small refineries once had it made
Easy finance meant midstream got paid
Now the landscape is bleak
Oil pricing remains weak
Now it's cheaper to split every grade

Figuring Out Aoxing Pharmaceutical's Future

Aoxing Pharmaceutical (ticker AXN) is one of those Chinese drug companies that wanted a US stock market listing. Such listings are a smart move if a thriving foreign company wants to raise capital here or expand operations beyond its home country. Either option will now face an uphill climb after some December news items about the company.

The company's CFO announced his resignation on December 4, 2015. That is not always a bad sign for a company aiming for a new growth phase, but consider some context. The resignation follows a report on December 2 that Pommerantz LLP is investigating alleged claims of Securities Exchange Act violations, and a December 3 report that Bronstein, Gewirtz & Grossman is also investigating Aoxing. It's hard to tell whether the allegations are substantial or simply a routine investor argument with management. Growing companies can experience these events in isolation, but investigations preceding a key resignation are a concern. Investors deserve an explanation but the company's web page reveals no news releases as of today responding to the law firms' allegations.

At first glance, Aoxing's profit margin of 22.83% and operating margin of 35.8% should indicate health. These measures don't square with the company's five-year average ROA of -18.68% and five-year average ROE of -50.75%. Aoxing's 2015 financial results show a sudden reversal of fortune after net losses in 2013 and 2014. Significantly higher gross revenue helped in 2015, in spite of persistently rising total liabilities and several negative changes in operating cash flows. Aoxing's SEC 10-Q filing dated November 13, 2015 notes in its MD+A how a shift in sales strategy from a third-party agent network to direct sales drove revenue growth. The strategy's reliance on independent direct sales will face challenges as China's drug distribution market changes.

Reviewing English-language reports on China's drug market reveals reasons to be concerned about any young Chinese drug company's ability to grow. AT Kearney's "China's Pharmaceutical Distribution: Poised for Change" reveals a fragmented distribution market and poor supply chain visibility. The US FDA's country director for China testified in 2014 about how hard US drug regulators are working to ensure Chinese drug exports meet US standards. Aoxing's future success in distribution will depend very much on securing healthy relationships with the three or four Chinese companies that will likely absorb much of the country's drug distribution network during consolidation.

Pharmaceutical companies with strong IP portfolios can tolerate high debt/equity leverage because their drug patents are supposed to be money makers. Aoxing's leverage will test US markets' tolerance if the company cannot sustain its net income improvement into 2016. The market is already showing its concern as the price of AXN fell from US$2.20 on June 8 to $0.92 on December 24. The company cannot blame this share price disappointment entirely on China's currency devaluation. Investors have a right to wonder how Aoxing responds to its US legal critics and China's changing drug distribution landscape.

Full disclosure: No position in AXN at this time.

Saturday, December 26, 2015

The Haiku of Finance for 12/26/15

Work on Boxing Day
Tech leaders will pay you less
Compete with cheap STEM

Silicon Valley Pivots From Collusive Wage Fixing to Immigration Wage Arbitrage

It was not that long ago that news stories broke about how the late great Steve Jobs brokered a collusive wage-fixing agreement among Silicon Valley's most powerful companies.  Almost all of the top players signed on because they wanted a ceiling on the compensation for their most talented workers. Silicon Valley has since found a better way to suppress tech workers' wages.

Tech big shots aren't satisfied with keeping their most productive rock stars in line.  They want to push everyone's compensation down by encouraging the immigration of skilled tech workers who are accustomed to far less compensation than American-born STEM professionals.  Temp workers on H-1B visas can come here for training and then return to the tech employer's branches outside the US. The foreign workers will earn much lower compensation there. Global wage arbitrage will drive American tech workers to compete with those lower wages. The Silicon Valley-funded pushes for a version of immigration reform that will open the door wide to permanently high immigration in STEM labor categories.

The legal settlement in the wage collusion lawsuit cost big companies $325M.  The total funding for so far is much less than that sum.'s listing for notes that they spent $720K on lobbying in 2014 and $420K so far in 2015. That's a tiny fraction of the $50M they supposedly raised according to re/code, begging the question of whether they spent the rest on TV ads or other things that have nothing to do with adding grassroots pressure to a lobbying effort. Experienced Washington hands would have told them to engage the US Chamber of Commerce and other inside groups to identify which members of Congress are most amenable to a pro-business argument. Better luck next time.

Billionaires don't like paying a premium for highly intelligent people.  Those people would then have the financial resources to start competing firms on their own.  The Valley's mandarins would prefer that their most skilled professionals remain wage slaves motivated by non-cash perks, like gourmet food courts and on-site yoga classes.  The road to neofeudalism will be paved with uncontrolled immigration. I am all in favor of sensible immigration reform that fills true labor shortages and offers illegals some kind of safe status. I just don't think has a clue how to make that case in Washington, if they're so inclined.

Friday, December 25, 2015

The Haiku of Finance for 12/25/15

Dancing crossover
Same players, many costumes
Tech and the ballroom

SF Bay Area Costumed Dances And Other Such Events

Here's a Christmas Day cultural excursion for you folks, in the generous spirit of the holidays. I am a regular attendee of the annual San Francisco Great Dickens Christmas Fair. I figured out early on that many of the fair's performers also frequent the Northern California Renaissance Faire and the Guild of St. George. In addition to their day jobs in the performing arts and technology, these fair performers populate a huge arts subculture in the San Francisco Bay Area. I'll run down a few of the creative outlets where I'm pretty sure they spend time.

The Edwardian Ball (find the link yourselves) grew into its current incarnation as a two-day imaginary trip to the light and dark sides of Edwardian era culture. The ball has a very distinct steampunk vibe. The edginess of ball performers performers like the Vau de Vire Society (again, find the link yourself) is exactly what pushes the creative envelope. Some of the acts and exhibits have dark or adult themes, so the ball is not for minors. That's why I can't link to their sites. I respect my agreement with Google AdSense and its covenants on acceptable content.

The Period Events and Entertainments Re-Creation Society (PEERS) is a way for many of the Dickens Fair and RenFaire people to continue their fun traditions all year long. Ballroom dance enthusiasts can waltz, foxtrot, jitterbug, and swing to their hearts' content. Changing themes every month is like time travel without Doctor Who's TARDIS.

The Gaskell Ball is probably the grandest of all of the formal ball events in this area. The setting at the Oakland Scottish Rite Center certainly evokes an ornate ballroom of the Victorian era, Belle Epoque, and Gilded Age. The black-tie charity galas I usually attend in San Francisco all support today's anarchic modern non-dancing, which resembles so many epileptic monkeys on drugs freaking out at random. Formal balls should be about disciplined ball dancing.

The Bay Area English Regency Society (BAERS) portrays a niche in Great Britain's Regency era that complements the Renaissance, Victorian, and Edwardian events above. I suppose I would have to read some Jane Austen before I attend to get the flavor of things. I would also probably have to visit the Greater Bay Area Costumers Guild to find appropriate period clothing.

The Art Deco Society of California (ADSC) holds its annual Art Deco Preservation Ball and Gatsby Summer Afternoon to promote an artistic aesthetic that modern Americans have unfortunately forgotten. The Bay Area's rich Art Deco history includes the Golden Gate Bridge. A couple of my friends have attended these events for years and I wish I had gone already.

The Maker Faire Bay Area is the only event discussed here that I've actually attended besides the Dickens Fair and RenFaire. Check out my report from Maker Faire 2013. The steampunk and Burning Man crowd mixes with DIY techies here. It takes a combination of drones, printable circuits, and Tesla coil music to hold my attention.

I would attend these events if I had more free time. It looks like 2016 will be a very busy year for me, so I doubt that I'll be able to participate in some of these very appealing events. The list wouldn't be complete without mentioning Burning Man, but I have no desire to attend that one because of some very questionable activity there that no one seems to control. I think a Venn diagram mapping out the various fairs and events would show a lot of crossover. Historical period re-enactors, steampunk and dieselpunk aficionados, and modern tech innovators have a lot in common. San Francisco gives them many reasons to interact.

Thursday, December 24, 2015

The Haiku of Finance for 12/24/15

Waiting for Santa
I have all the cheer I need
Genius is a gift

Christmas Eve 2015 Wish List

The whole world waits for Santa Claus while I count my natural intellectual gifts. I enjoy dispensing grace, like a benevolent monarch blessing worshipful subjects while posing regally upon my resplendent throne. I willingly carry the burden of genius through this season of joy. I am sufficiently joyful for a whole bunch of you readers. Sharing my Christmas wishes multiplies such joy.

My first wish is for Wall Street to quit ripping off investors. This happens in so many guises you'd think it's hard for crooks in suits to think of new scams. Lo and behold, their creativity never ceases. Hedge funds, structured notes, multi-manager funds of funds, late-stage unicorn startup funding, and other such garbage are things the investing public can do without.

Here's another wish: Wall Street needs to quit hiring trust fund kids. It's easy for these lazy creeps to bring in new money because they just whine and cry until their parents cough up dough. The problems come later when they refuse to do work and their less privileged co-workers have to pick up the slack. The whole banking sector would be better off not hiring these mental weaklings in the first place but those new asset referral bonuses are just too good for some managers to pass up.

I wish economic annihilation for all of my enemies and bonanza for myself and my many friends. Haters crawl out from their caves to spew racism at me on Twitter or slander me anonymously online. A whole bunch of English-speaking morons can't handle my genius so of course they compensate by embracing pure evil. True friends are more fun to have around, especially when they swoon after exposure to my overwhelming talent.

Finally, I wish the idiots who take shopping carts out of grocery store parking lots would acquire their own conveyances. I used to think this phenomenon was confined to low-income neighborhoods. Now I see it in well-off San Francisco neighborhoods. A whole bunch of financially secure people think it's okay to drag a grocery store's cart all the way home and not return it. The store then has to send its workers in a truck all over the place to haul these things back. They pass the cost on to you, people, while the staff in the store remain short-handed. If you're too weak to carry more than one bag of food home, then buy your own cart, for crying out loud.

Pass the eggnog and I'll mix it with brandy. I do that all the time during the holidays. I can metabolize booze like you would not believe because I'm the next step in human evolution. Santa can squeeze his fat red behind down someone else's chimney tonight, unless he has a big pile of cash to give me with no strings attached.

Wednesday, December 23, 2015

The Haiku of Finance for 12/23/15

Festivus grievance
Dumb people love lame products
Complaint for Wall Street

Alfidi Capital Airs Grievances For Festivus 2015

Attention Wall Street and the rest of the financial services sector. Today is Festivus and you know what that means. I've got a lot of problems with you people, and you're going to hear about it! You have all disappointed me very much this past year. I was spewing lots of Festivus grievances this morning on my Twitter account and now here comes the main event.

First of all, financial commentators who should know better kept casting the Federal Reserve's prospective interest rate change as something either "hawkish" against inflation or "dovish" for GDP and employment growth. Nobody even bothered to track the shift in the Yellen Fed's thinking as something where any change would lead to a return to normalcy. Wall Street disappoints me when its public mouthpieces can't slice the "layer cake" messaging.

Fund management companies continue to roll out garbage securities products. All of the leveraged and inverse ETFs out there can't possibly outperform the simpler passive ETFs but hardly anyone wants to state the obvious. I'm happy to say it myself. Simple, passive, broad market ETFs are cheap and efficient. Boutique but still passive ETFs for sectors and commodities have their place as hedges. Complex, leveraged, and "active" ETFs are expensive wastes of time.

The sector is still hooked on active management as an excuse to charge an arm and a leg for "outperformance" that never happens. Come on, folks, indexing sounded the death knell for active investment management decades ago but fund managers are still in denial. Robo-advisers are now completing the circle by cutting the costs of personalized risk management down to a few basis points. Financial advisers and their back offices will still be in denial long after AIs have taken their jobs.

Enough with the hedge fund craze already. It was cute to watch math PhDs play with algorithms for a couple of years, but now an entire enabling subculture has grown up around these stupid products. Hedge funds are nothing more than elaborate schemes for transferring wealth from dumb rich people to clever rich people. Cheap capital helps enable this stupidity. Illiquidity in a market crisis will end it.

I would gladly challenge any Wall Street CEO to a Festivus feat of strength because I know I'll win. I train for this stuff day and night. Alfidi Capital exists to shove a shiny Festivus pole right up Wall Street's crawl space.

Tuesday, December 22, 2015

Monday, December 21, 2015

The Haiku of Finance for 12/21/15

Holiday tech fest
Pitching during the party
Drink and raise money

Financial Sarcasm Roundup for 12/21/15

Here comes the special Christmas holiday 2015 edition of my sarcasm. Tonight I spent a brief interlude at CoInvent's holiday party at General Assembly's San Francisco office. The party was fine and I got my fill of free booze. I can't complain about parts of the startup ecosystem that competently execute their business models. I can only blast some sarcasm at other parts of Silicon Valley culture that are not living up to their reputations.

I spoke with one longtime contact at tonight's party who sells office furniture. He remembers the 2001 dot-com crash all too well, and how easy it was to pay bargain prices for like-new high-end office furnishings. I mentioned the recent deflation of a few unicorn startups, you know, the ones with undeservedly high valuations. I'm pretty sure he can expect loads of office bargains coming his way soon as other unicorns fail to deliver on their early investors' expectations.

Everyone I met had something to pitch. Anyone who arrives at these types of things without a pitch should think of one really fast. My pitch was "I want free wine," and lo and behold the free wine materialized right in front of me. That was fast. I didn't even have to ask. I did ask for free food but none was forthcoming. Only one of my two pitches was effective.

The CoInvent holiday party intended to raise money for Charity: Water. I am all in favor of building clean water projects in developing countries. Before you know it, those underprivileged folks will be watering lawns and washing mud off SUVs just like we do here in the U.S. We can then teach them something about water conservation after they've wasted all of the water they never knew they could pump.

San Francisco tech events just aren't the same if I'm not gracing their presence. Techies flock to hear my wisdom when I attend anything. I celebrate the winter solstice with my own personal Saturnalia that lasts as long as I feel festive. Ancient people worshiped the gods of nature. Modern people worship the god of tech and finance . . . that would be me, yours truly, Anthony J. Alfidi.

Sunday, December 20, 2015

The Limerick of Finance for 12/20/15

Brent crude prices testing new low
Strong dollar puts on a good show
Traders can't find price floor
Oil exporters pump more
Production still has room to grow

Saturday, December 19, 2015

The Haiku of Finance for 12/19/15

Smart generator
Runs green and orders its parts
Site power backup

Offsite Power Equipment And Component Supply Chains

It's ten o'clock at night somewhere and you're running an off-grid power source for some remote site, or even an urban site on the grid that needs back-up power. Suddenly some component in the generator fails and part of your site is without power. Your smart microgrid software management system kicks in and instantly routes power from other generators to the affected area. Coverage is instantly back on. In theory, this is how every microgrid power system should work. In reality, everything comes down to the grid's supply chains.

Hydrocarbon-based power generators are well understood after decades of use in construction and mining. Renewable energy micropower systems are just now coming into their own. The recently concluded 2015 United Nations Climate Change Conference (aka Paris COP21) climate and energy accords will make any hydrocarbon-based power source increasingly expensive in perpetuity. The market for off-site renewable power thus gets a big global regulatory boost.

The major equipment providers should start retooling now to offer the kinds of off-grid renewable power sources that will now be in vogue. The component supply chains for these things are not always completely portable to renewables. Putting solar panels on a generator means sorting through lots of Chinese panel makers and German rack makers. A lot of Chinese solar companies won't be around in a decade as that country's industry shakeout proceeds. Equipment makers should choose their solar suppliers with future reliability and surge order capacity in mind.

Quite a few apartment complexes and office towers here in San Francisco have some kind of power backup system. The property managers will have to seriously consider replacing any diesel-powered systems they own with renewable systems once COP21 emissions controls become US standards. Here comes a bonanza for equipment companies riding the leading edge of generator and storage system adaptation. The ones whose products survive will do their homework now on solar and battery components.

Friday, December 18, 2015

The Haiku of Finance for 12/18/15

The Fed awakens
Higher rates should blow things up
Use the Force with cash

The Fed Awakens

Today was opening day for Star Wars: The Force Awakens. I went to see it and it was pretty awesome. Lots of spaceships were shooting lasers at each other and blowing up stuff. Stormtroopers were running around and some other people were swinging lightsabers. It was all really cool. In the real world, the Federal Reserve raised its target interest rate range by 25 basis points. That turned out to be really cool too.

It would be nice if the Fed could raise interest rates all the way to a more normal level, like to 6.00%. That would be the required shock therapy to kill off uneconomic business projects by pricing them out of the range of reasonably available capital. The Fed continues to aid and abet the mispricing of capital by keeping interest rates much lower than their historical norms.

Future investors will thank the Fed once asset prices crash if only the Fed cared about true normalization. US equity markets don't care much for normalization and they yawned in response to the Fed's move. A truly normal interest rate move would act like the planet-sized superweapons we see in the Star Wars universe by blowing up bad investments. That's exactly what the galaxy could use right about now. I normally favor the light side of the Force. The Fed's refusal to truly normalize rates keeps fundamental analysts like me in the dark about intrinsic valuations.

Thursday, December 17, 2015

Tuesday, December 15, 2015

Monday, December 14, 2015

Sunday, December 13, 2015

The Limerick of Finance for 12/13/15

Yahoo may have problems with its sale
Tax penalties turn buyers pale
Spinning off the wrong part
Forcing proxy fight start
Core Web assets are all that can scale

Friday, December 11, 2015

Thursday, December 10, 2015

Monday, December 07, 2015

The Haiku of Finance for 12/07/15

China baloney
Currency of corruption
Yuan fits regime

Financial Sarcasm Roundup for 12/07/15

Forbes thinks we should buy stocks before the Federal Reserve raises its interest rate target. Some editors forgot to mention that even a slightly higher cost of capital will force companies with weak balance sheets into serious trouble. I shake my head whenever a media publication that is obviously not a licensed brokerage purports to give financial advice to readers whose personal situations it cannot know. There's more to bank stocks than book value. Buying one without knowing its Texas ratio or capital adequacy ratio is like buying a pig in a poke.

Lower oil prices offer some support to long-term bond prices. I'll believe that correlation holds when someone shows me data for a time series longer than 48 hours. Interest rates still govern the yield curve in every country with a bond market. Any rise in the Fed's target rate means oil loses its hold on bond prices and the long end of the curve comes under downward pressure. It must be a slow news day when bond traders need to swallow an argument for tracking oil prices instead of the risk-free rate of return. I never ignore sovereign credit risk, but that concern escapes bond fund managers who take their eye off the ball and get distracted by oil.

I have noticed lots of mixed reactions lately about the IMF's acceptance of the Chinese yuan as a reserve currency. There's always an echo chamber blathering about how this is some harbinger of China's renewed rise to world dominance. Gimme a break already. When China matches the US's ranks on various data indexes for development and the rule of law, it will be trustworthy as a regional hegemon. I think a lot of the noise about the yuan is driven by portfolio managers who would like their Chinese positions to be more liquid in case they have to sell out quickly. Chinese elites buying vacation homes in California are already selling out.

Once again, there is no financial advice to be found at Alfidi Capital. I don't write this way to help anyone. I amuse myself when nutty market events are on my radar.

Sunday, December 06, 2015

The Limerick of Finance for 12/06/15

Universal income coming soon
Finland first to see if it's a boon
Getting paid just to live
No real effort to give
Take the check and then sleep until noon

Saturday, December 05, 2015

Thursday, December 03, 2015

The Haiku of Finance for 12/03/15

Make the grid smarter
Redundant micro-storage
Energy at home

Modest Proposal To Save Yahoo

Memorandum To: Yahoo's Board of Directors

From:  Anthony Alfidi, CEO of Alfidi Capital

Subject: Modest Proposal To Save Yahoo

Hello there, board people. I noticed some recent news articles about how your board is considering some serious pruning at Yahoo. I'll offer a brief outline of what I think you should do before shopping around to some private equity firms. I am available to discuss this plan over lunch at a fine Palo Alto restaurant provided I don't have to pay the bill.

First, sell Yahoo's Alibaba stake to the first taker. No one outside of China's ruling elite knows how to fairly value Alibaba. China's securities rules and Alibaba's own corporate structure are so opaque to Western observers that any continued involvement risks a very bad surprise. I strongly suspect a lot of Chinese-domiciled companies whose shares trade in US markets are not doing nearly as well as they or their Wall Street enablers claim.

Next, spin off every property not directly touching Yahoo's longtime core functions of search and email. Google did something similar recently when it split off its more experimental projects into Alphabet. The Yahoo spinoff will thus be a collection of multimedia projects that probably don't work well with search and email anyway. The spinoff would be an attractive acquisition target for a large media company that wants to leverage its legacy cable broadcasting infrastructure into new digital things.

Finally, offer the remaining rump of Yahoo, based on search and email, to Microsoft as an acquisition. The offer should recapture the intent of Microsoft's 2008 attempted acquisition that would have added Yahoo's search capability and email user base to Microsoft's more successful product lines. Microsoft is already the cloud provider that Yahoo will never become. Unwinding the unneeded parts of Yahoo is best done before integrating with Microsoft, as it reduces inevitable cultural friction.

Please thank Ms. Mayer and her Yahoo team once all three deals are complete. They have tried their best but they are not helping Yahoo remain an independent company. I do not foresee a role for any of them at Microsoft or a media company after they are done with Yahoo. They have not proven their ability to integrate media projects with search or anything else. Maybe they could land at startups after their golden parachutes deploy. They can learn to be hungry and push for growth all over again.

The Alibaba sale and media property spinoffs should add enough cash to Yahoo's treasury to make the rump company palatable for Microsoft to safely digest. I'm not going to run the numbers on this scenario because that's not my job. I'm the "idea guy" here. My big idea restores Yahoo to its best value proposition and ends its odd status as the only 1990s-style Web portal business model still standing in the cloud age. Its legacy projects will survive in other companies whose business models are more coherent. Saving Yahoo means ending its independence. Let's close the books on this original dot-com era story.

Full disclosure: No position in Yahoo, Microsoft, or any media company at this time.

Tuesday, December 01, 2015

The Haiku of Finance for 12/01/15

Paying in advance
Wise move before inflation
Lock in expenses

Federal Reserve Rate Rise Waiting Game

The anticipation over the Federal Reserve's likely target rate increase is approaching fever pitch, at least for a few thousand economists, bond traders, and analysts who are otherwise surgically attached to capital markets information systems. We can amuse ourselves with what-ifs while awaiting the Fed's formal announcement.

What if the Fed raises rates by only a notional amount, like 25bps? Money market fund managers will probably breathe a sigh of relief that they won't face extraordinarily large redemptions. We cannot say the same for fixed-income fund managers, especially those with actively managed portfolios skewed towards the long end of the yield curve.

What if the Fed raises rates more than the notional amount, like anything from 25bps to 100bps? Money market funds would scramble to meet redemptions if they own anything other than overnight paper. Some of the funds would have to lean on the Fed's emergency tools, making all of the dry runs up until now worthwhile. The US equity markets would likely suffer a severe drop as companies with the weakest balance sheets immediately face higher overnight borrowing costs.

What if the Fed leaves rates unchanged? Bond fund managers breathe a sigh of relief for another quarter and the US stock market gets a little bump. The market bump continues into January if Christmas sales are better than expected. The large investors moving markets, particularly hedge funds, will tend to ignore whether the holiday sales are better or worse than last year's numbers. They only notice the headlines.

The first scenario for a 25bps increase is the most likely one, but doing nothing is always an option. A larger rate increase is probably not an option given its consequences. The Fed needs to test its new emergency levers under real world conditions before it puts the economy on a path to a more normal yield curve. The end of the Fed's emergency lending policy for SIFIs changes one such lever significantly. Testing with minimal stress is always best, but the test must come at some point.

Monday, November 30, 2015

The Haiku of Finance for 11/30/15

Adviser practice
Register, insure, audit
No such biz for me

A Former Financial Adviser's Unchosen Route To Independence

I created Alfidi Capital to be a research-only platform, which is fine by the SEC so long as I do not maintain fiduciary relationships, sell securities for third parties, provide personal advice or recommendations, or do other things that fall under regulatory guidelines. I considered going that traditional route at inception, and I quickly realized that doing brokerage or capital markets transactions were part of the things I did not like about working for other people. My thinking has not changed since 2008 and neither has my business model. I might as well lay out some of the thinking I did before turning away from the more common path to independence.

I first checked the regulatory requirements for a registered investment adviser (RIA). The SEC's basic guidelines for investment advisers point to its IAPD site for filling out its Form ADV. I reviewed that form and realized that it does not apply to me as long as I am not providing financial advice, selling financial securities, or maintaining custody of assets other than my own.

I reviewed the institutional platforms of several leading self-service brokerages. The platforms come bundled with custodian and clearing services, plus some optional things like independent research subscriptions. I would not be surprised to find social media services bundled with some platforms now, along with media archival systems that meet SEC compliance standards. I realized I did not need to spend money for such a platform if the only money I ever manage will be my own.

I checked FINRA's rules for the registration and qualification of advisory firms. There's a lot of things there to know for someone who doesn't handle compliance as a full-time job. I would have had to meet all of the compliance requirements like client correspondence recordkeeping, transaction auditing, keeping copies of advertising material, writing a compliance manual, using business cards with the state insurance registration number on back, etc. There are lots of independent SarBox consultants who charge big fees for this activity. I will always be too cheap to pay for anyone else's services. I did not want the operating expenses of regulatory compliance or an "RIA in a box" solution.

I needed an alternative to the overhead of an owned RIA platform. I briefly researched an arrangement where potential clients could custody their assets in a conventional account with a discount broker, but grant an adviser limited power of attorney to execute transactions and extract a management fee. That's the approach of at least one RIA in San Francisco. When I spoke to the local one I thought was a good model, I realized there was just no way to escape the potential problems of dealing with clients and regulators.

The administrative things that my former wealth management employer used to pay for like insurance, licensing, continuing education, etc. would have become my own expenses. I thought about finding CE requirements through a local chapter of the Financial Planning Association. The FPA is probably full of plenty of independent practitioners, and I had wondered if some older adviser would hand over a book of business prior to retirement. The window for such opportunities is rapidly closing now that discount brokerages are deploying robo-advisors with automated portfolio rebalancing. I would have wasted time buying into a dying business model.

All of my homework revealed that an adviser model would never work for me. Publishing general circulation research is consistent with SEC analyst rules and reflects my intellectual gifts. I have said before that Alfidi Capital does not perform financial brokerage and advisory services for others. There is no way this firm or I will ever conduct securities transactions and business with the investing public. I stand by my decision.

Sunday, November 29, 2015

The Limerick of Finance for 11/29/15

Cyber Monday is looking so good
Shoppers prefer online neighborhood
Retail sales pitches shift
Discount changes are swift
Stores would all sell online if they could

Saturday, November 28, 2015

Friday, November 27, 2015

Thursday, November 26, 2015

The Haiku of Finance for 11/26/15

Thank America
Freedom to think for one's self
No need to thank me

Giving Thanks For Stuff In 2015

Thanksgiving in 2015 means I get to watch the rest of America slack off and indulge. I did some of that too today but my brain is still engaged 100% in the genius of Alfidi Capital. It's about time that I recognized some recent inspirations for my genius and give them thanks.

I'll thank the steady drip of followers who add to my Web brand presence when they republish my content. Smart people know quality when they see it. I just can't help it when the raw genius radiates from my presence. Life is best when we fulfill our destinies.

I might as well thank a couple of recent critics who called me names on social media channels. They kept my Web brand in circulation for a few more media cycles. I really enjoy being the target of ill-informed, ad hominem attacks that feed my ego. The First Amendment gives every American the right to speak their minds. I am thankful that even small-minded people notice what I have to say.

I must especially thank a handful of female friends whose constructive feedback is helping me abandon my previous sexism. Careless word choices do have real negative impacts. I am now much more careful than I was earlier this year when commenting on gender subjects. Women don't need some random loudmouth stereotyping them into irrelevance when they deserve more in life. They do in fact need men as advocates who include them as equals, whether it's at the Thanksgiving dinner table or in the corporate boardroom. I have a lot of advocacy to do with the rest of my life.

In years past I've stated that the world should be thankful for my existence. I still see nothing wrong with that even if the world has no thanks to give me. It is unrealistic to expect much of the planet to think like me. I am still morally obligated to be true to myself. I can thank my favorite philosophers - Stoics like Marcus Aurelius and Seneca, plus Immanuel Kant and his Categorical Imperative - who reminded me how to live when I reviewed their works this year. My life is still my own, but my work should enhance humanity's moral worth.

Finally, I thank the Founders of our country who wrote the US Constitution and its Bill of Rights. The rule of law and the elevation of individual freedom enable me to run Alfidi Capital in a manner of my choosing. I could not have this type of lifestyle in other countries where busybodies, thugs, or authoritarians would silence me for speaking my mind. America is awesome and so am I. Happy Thanksgiving, America.

Wednesday, November 25, 2015

Tuesday, November 24, 2015

The Haiku of Finance for 11/24/15

Food selfie takers
Sponsors will pay promotion
Dinner makes money

Financial Sarcasm Roundup for 11/24/15

I should have blasted this out yesterday but cleantech thoughts kept me occupied all day long. It is better to be clean than dirty. Just ask any pig headed to the slaughterhouse.

Wall Street averages continue to rise in spite of global economic headwinds. Greater fools are always ready to rush into the top of a bull market. I have been waiting for these fools to get financially kneecapped for the past several years. The spectacle will be worth the wait. My cash will be ready when the top-buyers are all broke.

The Federal Reserve may raise rates in December, according to the consensus interpretation of its most recent notes. It's important to remember that the Fed can immediately reverse itself if a rate increase proves too explosive for the system's emergency brakes. Our mandarins are playing it by ear because they have enticed every investor to take on extraordinary risks. The first rate rise past 0.25% will test the yield curve's long end, and make long-duration bondholders wonder whether their portfolios are safe.

Some obsessive food selfie people have figured out that restaurants and other food service sector companies will monetize their food photos on Instagram and other social media sites. It's great that people who want us to know what they eat will make money from their idle habits. Eating is a natural function, so perhaps we can take other natural functions to their logical monetary conclusions. People who take shower selfies can sell Instagram advertising space to makers of soap and shampoo. Do I have to mention other bathroom functions? Don't make me go there.

I promised my cleantech contacts that I would clean up my act. I behaved myself this time around. My word is my bond.

Monday, November 23, 2015

The Haiku of Finance for 11/23/15

Startups pitch green stuff
Magic tech cleans the planet
Living the profit

Mastering The Cleantech Open Global Forum 2015

I have attended the Cleantech Open's events for three years now and I always come back for more. I had to jump into the CTO's Global Forum 2015 last week to see what this year's class of startups had done. Badge selfies are my bona fides because they prove I am not some AI bot randomly generating blog content.

Driving down to the CTO's home at GSVlabs is always worth my time. The co-working trend is now a serious thing. Startups eschew privacy and security by taking open-space collaboration to an extreme. I think the next trend could be co-working outdoors, where startups can plot their huge markets on picnic tables. Nah, just kidding. I wouldn't want to do office work outside because wild animals like bears and coyotes run around out there looking for people to eat. Smart VCs won't fund a startup where the founders risk getting devoured by packs of wild beasts.

The Investor Connect speed-dating round had a table reserved for yours truly, the CEO of Alfidi Capital. Someday I'll be #1 but this time I was at the #2 table. I am usually the #1 genius on hand wherever I go in life. Most normal people recognize this as soon as they meet me. Serious VCs and angel investors were at the other tables and I had the chance to interact with a few of them during breaks between meeting startups. Sharing insights helps me understand how much startups learn during their early phases.

I will share what I learned from the startups I met at my table. These are general impressions that cover many verticals. Addressing a scalable market means going after a big demographic whose price points and buying power are easily understood. Going after boutique markets with fragmented demographics (like organic farmers, for example) means a startup's marketing channels will be less efficient. Lowered efficiency in anything, especially finding a marketing channel, means a startup needs a longer runway to profitability. Proprietary technology must be difficult to duplicate. A simple device with common components is easy for a competitor to reverse engineer.

I also attended the CTO's Celebration Day in San Francisco's Herbst Theatre. It was my first visit to the Herbst since the Veterans Building's renovation. The drinking fountains on multiple floors actually work now after several years of inactivity. The downstairs bar looks pretty snazzy. Dag-nabbit, I should have taken photos.

The winners and finalists ran the gamut of tech. I heard pitches from startups doing biomass gasification, carbon nanotubes, pollution tracking, and SaaS analytics. I can't connect with businesses outside the United States because my personal prerogative is to only work with companies located in the US that American citizens own. I'm sure there are plenty of those to find.

Famed VC Ira Ehrenpreis gave his keynote that doubled as a highlight reel of his favorite investments. I'm pretty sure I heard him give this talk before at a conference down in Silicon Valley at least a year ago because I recognized many of the slides and themes. He told us that the best time for tech investing is right after a sector bursts its bubble, because the final survivors are in the best position to be long-term winners. I think the solar sector is still in the middle of its shakeout, so anyone making panels or modules after the last low-quality Chinese producer goes bankrupt will be in a sweet spot. I also think solar suppliers that adhere to all of the DOE EERE SunShot Initiative's standards will have an easier time convincing developers to include them in supply chains. Ira also mentioned the "second bottom line" importance of ESG criteria, another set of guidelines our aspiring startups must adopt if they want to attract impact investors.

I noted one concluding quote with interest: "There's no such thing as a bad contact, but there is such a thing as a bad way to follow up on a contact." Well, I had plenty of bad contacts when I worked in sales, and plenty more when I was between jobs trying to make a career for myself. There really are tons of bad people in the world and they succeed in spite of themselves. I avoid those types because I'd rather meet the ambitious folks populating the cleantech sector. If I get rich after investing in one of these startups, then I could finally afford to be a big-shot sponsor of the Cleantech Open.

Sunday, November 22, 2015

The Limerick of Finance for 11/22/15

Trading futures contracts is okay
For companies with cash to pay
Hedging the supply chain
Avoid volatile pain
Commodities always in play

Saturday, November 21, 2015

The Haiku of Finance for 11/21/15

Launching restaurant
Take a bite out of savings
Tasting sweet success

Restaurant Investing 101's Sustainable SF Bay Area Flavor

A dear friend recently asked me if I would ever invest in a restaurant. The restaurant sector isn't for me, and I don't personally know anyone who invests there, but it's a fascinating area nonetheless. I scoured the Web for some basic coverage of restaurant investing and the investors who make it work. Check out this 101 primer.

The National Restaurant Association should be the first stop for first-time eatery investors. The industry's clearinghouse reveals the inside scoop on managing a store. The search box turned up tons of articles on topics like "investment" and "sustainability," including the NRA's Conserve Program that's worth a look for potential owners.

I tried to find a link to the NRA's annual Restaurant Finance Summit. Instead I found Restaurant Finance Monitor, which runs its own finance and development conferences. Capital sources populate the Monitor's finance and real estate directory. I don't have time to read through their white papers but the ones on sale-leaseback financing and restaurant valuation look especially useful for investors.

Not every source is as authoritative as the restaurant industry's official organs. The Wiley "For Dummies" imprint has a bunch of articles on food trucks, but of course the dining sector is much larger than what rolls on streets. Searching the Dummies brand for "restaurant" turned up tips on menu selection and social media marketing, plus many irrelevant topics. I sought wisdom at and found mostly anecdotal articles touting "industry insights" rather than the hard research and checklist an owner-operator needs. Gourmet Marketing's learning center has some decent tips on investor due diligence and critical management numbers, but I would prefer to see those suggestions populated with industry data.

Owner-operators have a wealth of prospecting sources thanks to the digital economy. AngelList has thousands of self-identified restaurant angel investors. It is difficult to tell at first glance which ones are still active or have successful investments. Some AngelList people don't mind being prospected because that's how they vet new ideas. EquityEats is a crowdfunding platform specifically for restaurateurs raising seed capital for their first storefront. The good news for all startups, including eateries, is that the SEC is liberalizing rules on crowdfunding right now. Non-accredited investors will soon have many more crowdfunding options available, and entrepreneurs will have more channels to raise capital if they have good legal counsel to keep them compliant with the SEC's JOBS Act rules.

Non-profits like to help with restaurant incubation, at least here in the SF Bay Area. La Cocina focuses on assistance for restaurant owners in disadvantaged demographics, but their resources page includes planning and financing sources invaluable to any restaurateur. Forage runs another Bay Area kitchen incubator and promotes sustainable dining through its supper club.

Speaking of sustainability, it now matters in retail dining. My San Francisco blog coverage must include the local scene's sustainable dining culture. The Center for Urban Education about Sustainable Agriculture (CUESA) covers everything from farm to table. Entire dining supply chains can now be sustainable. The trend towards sustainability also gets national notice. Full Service Restaurants has detailed coverage of sustainability developments. The Center for Food Integrity and its CFI ENGAGE Resource Center offer a national perspective on food supply chain quality. Entrepreneurs launching a sustainable dining space need the seal of approval that comes from participating in these programs. Earning a B-Corporation designation probably helps show a restaurant's commitment to a sustainable philosophy.

There's a lot here for a restaurant owner to digest, no pun intended. San Francisco investors like to see sustainability when they perform due diligence on potential investments in any category, based on what I've gleaned from attending the Bay Area Impact Investing Initiative's (BAIII) events. The federal government is getting into the act with the SBA's sustainable business practices for small firms. It's all food for thought . . . again, no pun intended.

Wednesday, November 18, 2015

Tuesday, November 17, 2015

The Haiku of Finance for 11/17/15

Open source robot
Runs on networks anywhere
Market fit for nerds

Open Source Random Automation Everywhere After K-TECH K-Global

I attended another Silicon Valley conference last week, just for kicks. This one was the K-TECH K-Global Silicon Valley 2015. I don't think I'll ever tire of the non-stop innovation merry-go-round of conferences, trade shows, lectures, pitch sessions, and other stuff. One theme from last week's event was the "open source" movement in several tech fields. I absorbed a great deal of what the featured speakers said because I'm like a sponge. Prepare yourselves for a blast of my genius thinking on how it's coming straight to you.

Every multinational corporation that makes anything electro-mechanical is gearing up to market connected living and the Internet of Things. All devices requiring remote power management will have really cool marketing campaigns. Crowdfunding can deliver tiny things that VC funding cannot build. The ugliest things in your neighborhood, like above-ground utility poles and traffic lights, will become exploitable IoT sensor platforms.

Minimally educated non-experts can now program robots to perform complex tasks by moving their armatures around. Mobile phones have reduced computation costs to do more things on chip space, enabling advanced robotics. Robots are coming to your senior citizens' assisted living facilities because the West's demographics are increasing the number of retirees per active worker. Vision sensors developed for gaming will make robots more capable. Open source standards like the Robot Operating System (ROS) make enabling software easier to develop. One dude at last week's conference mis-identified the Unified Robot Description Format (URDF), making me wonder which of his assistants needs corrective training on due diligence.

Robot as a Service (RaaS) is a cute term for hospitality or other service sectors leasing outsourced robot servants. I expect autonomous cars to be part of this category. Programmed drones and cars eliminate operator error. Humans will build trust with these things by experience. Instances like "mobile moments" will need another definition like "autonomous moments" that include the short engagement spaces where humans interact with autonomous things for the first time.

The Open Source Robotics Foundation (OSRF) is right here in the SF Bay Area. I predict OSRF will be as ubiquitous as GitHub and Wikipedia once the automation revolution takes off in our personal lives. IoT devices need APIs and PKIs to interact with networks and cloud platforms. Drones, medical devices, and 3D printing will bring new headaches for tech companies' Chief Data Officers and Chief Privacy Officers. Those things must also tap into IoT APIs and PKIs. I checked for National Institute of Standards and Technology (NIST) standards covering drones, robots, and other automated IoT things. The NIST search box revealed many preexisting standards for related subjects in manufacturing, design, and programming. The next-gen standards will have to come from places like OSRF pushing NIST to catch up.

We will all need something to do once automation makes our jobs redundant. Basic income guarantees aren't enough without something to occupy our idle time. Video games and creative stuff are primed for an explosion. Social cohesion may explode too. Elites have not prepared memes for the population to adopt in a jobless future. Thought leaders like me will work overtime to sell the good news of open source automation.

Full disclosure: I did not talk to any South Koreans who attended K-TECH. I was only there to listen to speakers on the first day. I have no business interests in South Korea or with South Korean citizens at all. The last time I was in South Korea was January 2000 while performing US military duties.

Monday, November 16, 2015

The Haiku of Finance for 11/16/15

Imagine cable
More bandwidth for mobile streams

CableLabs Brings Inspiration For Reimagining Cable

I attended the "Reimagining Cable" presentation last week at the CableLabs Silicon Valley office, sponsored by HVCK. Mobile enthusiasts say cable broadcasting is going the way of the dinosaur. Well, Silicon Valley's innovators have something to say about that. CableLabs pushes the industry into a new digital era. I sat down to watch the new era take shape after some snacks. Our hosts gave me an awesome adhesive visitor badge.

The assembled startups presented their stories. I won't name them or retell their stories because I would rather share my impressions. Personal video profiles are a cool addition to social media channels. The competition in video profiling is exploding because there is little barrier to entry other than the first-mover advantage of licensing a video standard to one of the leading social media platforms. Video production that competes directly with YouTube and Vine needs some compelling advantage in editing or animation. Synchronous remote video viewing and interaction may actually be less convenient than social media sharing because it requires friends to watch something live together. The best social media experiences are shared to allow the convenience of watching video anytime rather than synchronously with other people. Some shared video experience may be useful as a bridge of high-speed and low-speed streaming if it is sufficiently distinct from Periscope or other chat sharing portals.

I tried to see into the future based on what techies were portraying at CableLabs. IMHO live video sharing will only reach viable mass markets in two verticals: enterprise video teleconference (VTC) and adult entertainment. That's really it unless use cases confirm that groups of people will stop whatever they're doing to chat on video at a moment's notice. Snapchat's billions of videos served are good market proof that TV viewers now watch more video of each other than of traditional productions. I would still like to see deeper metrics on total hours watched and numbers of videos watched to completion instead of just video upload totals. An upload does not always get watched, and it rarely goes viral.

Some ideas still need new tech, while other new ideas compete with tech that's already available. Multiple streams requires much more bandwidth stressing 4G's real-time streaming ability. Multi-second lags will degrade viewing quality. Engineers must design new compression methods allowing real-time multi-streams with no lags on mobile devices. I have already witnessed eyeball-tracking video tech startups that demo'd at other events and got VC attention. That train has already left the station. Eyeball-tracking is viable and some players think it will disrupt advertising spending. Maybe 360-degree video will be the next compelling viewer experience if it's immersive.

I grew up on cable TV. Reality shows had not yet taken over programming back in the 1980s. The shows on the high-minded cable channels like Discovery, A+E, and Bravo really had quality before lowbrow programming took over. Cable networks still have enormous bandwidth and content libraries. They just have to move their legacy business model into something that fits mobile platforms. I will live long enough to watch the complete transformation.

Sunday, November 15, 2015

The Limerick of Finance for 11/15/15

Japan falling back in a hole
Nothing made the economy whole
Abenomics can't lift
A demographic shift
Central bankers should find a new role

Glimpsing IBM Watson's High Tech Analytics In Silicon Valley

Silicon Valley types want me hanging out at their business events. One such event last week brought me down to one of the Valley's private venues for an IBM Watson presentation. I'm not the target clientele for this Big Data analytics solution but I had to check things out. There was no suitable on-location backdrop for my badge selfie, so I had to take the photo below at an undisclosed location.

I signed up to hear their two tracks on procurement intelligence and trade-off analytics after the main pitch. IBM people get the API economy. I heard them pitch their API developer ecosystem at Oracle OpenWorld 2015, and now it's good to see the Watson engine in action. The Alchemy Language API looks like an incredible business intelligence (BI) tool. The "news explorer" live link diagram showing connected news stories would be excellent for PR or marketing people, or for open-source intelligence (OSINT) practitioners.

The main pitch dude's recommended reading list included a book on machine learning, but I couldn't write down the author's name from where I sat. Amazon lists plenty of machine learning best-sellers, so my local library must have one. I did capture Pedro Domingos' The Master Algorithm and Provost/Fawcett's Data Science for Business from his list, unless I copied the titles incorrectly. I have so many books to read already that adding these will push the completion of my business reading list well into 2016. That's what it takes to demonstrate thought leadership, and that's why I get invited to these events.

One IBM guy introduced his "Cognitive Computing Index" describing multiple ways for human operators to educate maturing AI systems. IBM suggests Watson's clients iterate revisions every 90 days for whatever they have the system compute. Iterative approaches to refining BI output are supposed to maximize the BI's monetary value, and seat count users should see this value in their commission revenue.

The trade-off analytics session demonstrated Watson's Pareto optimization, graphical outputs, and social media stream matching. The recommended pathway records are a useful audit trail for some data miner to explore. I bet that data mining the faulty pathways will reveal how the top 20% of data scientists in an enterprise are making 80% of the correct decisions. That would be some useful Pareto optimization when performance bonus allocation time comes around.

The procurement intelligence session was all about making purchasing people into knowledge workers. I remember how I did purchasing as a junior supply officer in the US Army back in the late 1990s. I searched the Web for three different vendors and picked the one with the lowest price. It was too easy and probably sub-optimal. The difference today is that Watson is supposed to make research on prices, vendor choices, and spending history a Big Data effort. If AI truly integrates internal and external data feeds as advertised, then it's a bona fide ERP revolution. If users comprehend Watson's word clouds, heat maps, and visualizations, then it's also a knowledge management (KM) solution.

I keep hearing Silicon Valley people talk about how they increasingly prefer workflow ERP solutions over managing legacy files. I told several IBM reps at this event that they will have to integrate workflow data signatures into the internal feeds Watson ingests if they want to stay relevant. It will still be a challenge for developers to build APIs that handle unstructured data, especially if the enterprise has no data warehouse or data lake aggregating external data feeds. The best developers will figure it out. I would figure it out but I'd rather fiddle with financial applications. Watson and other AIs are supposed to be the "easy button" for data transformation once operators are comfortable educating the systems. The AI revolution means everyone becomes an amateur data scientist.

Saturday, November 14, 2015

The Haiku of Finance for 11/14/15

Solar project help
Free financing resources
SunShot knows the cost

Solar Project Finance Brief Notes Q4 2015

I absorb tons of renewable energy news every year, even when Intersolar North America is not in session. There's no stopping the growth of solar power. Every apartment rooftop and parking lot in America is untapped real estate for PV panel projects. Getting the basics right matters. Here come some brief notes for developers wondering about financing a solar project.

Engineering, procurement, and construction (EPC) costs are hard to estimate. Changing a major supplier for racks, mounts, or converters means recalculating part of the project's cost estimate. The shakeout in commoditized solar module providers has not ended. The future bankruptcy of some mount maker means replacement parts will not be available after a localized system failure. The cost of procuring some potentially incompatible mount that requires further customization is a variable adding potential cost to a project's out-years.

One large solar tech provider, who shall remain nameless, argues that cost of capital is a major factor in solar's levelized cost of electricity (LCOE). I think that was true up until the 2008 financial crisis when the Federal Reserve lowered its interest rate target to less than 0.25% and kept it there. I also think developers in a low-rate era should concern themselves more with how soft costs detract from a solar project's bankability. Developers who apply the DOE EERE SunShot Initiative's soft cost best practices have a leg up in getting those estimates under control. Of course, if the Fed raises rates or loses control of the yield curve during hyperinflation, then capital costs will matter once again. Solar developers with long-term supply contracts will progressively reduce their inventory costs during a hyperinflationary period.

Free public resources help developers learn about project finance. The DOE EIA Annual Energy Outlook Documentation and Assumptions section has an excellent reference for estimating LCOE. Developers need good references to make robust estimates. The DOE's NREL Renewable Energy Project Finance site is loaded with tips on securitization and credit enhancements. The Solar Energy Industry Association (SEIA) policy page keeps developers current on tax credits and other incentives that mitigate project costs. Solar Industry Magazine's October 2013 edition had an excellent primer on preparing project finance. The article's coverage of the PPA's relationship with site details and off-taker financial strength is noteworthy.

Solar project finance help is as close as a Web search. You can all thank me later. I'll take my bow right now for keeping the best solar financing references out in the public eye.

Friday, November 13, 2015

The Haiku of Finance for 11/13/15

Selling sarcasm
Many people won't buy it
They want hope instead

Adjusting My Voice On LinkedIn, Without Sarcasm

Sarcasm has long been one of my favorite accents. It can be appropriate in sparing amounts. It can also be too much of a good thing. Branding myself as all sarcastic, all the time, in front of all audiences has outlived its usefulness. Observing my personal brand through someone else's eyes made me realize it needs some polish.

I made some significant wording changes to my LinkedIn profile. I removed all of the sarcastic references to my former employers in finance and my alumni associations. I re-worded those experiences to describe my roles there in a more balanced way. I cannot be angry forever. Permanent anger is not a healthy way to see the world or approach people. It no longer matters whether privileged people treated me poorly. Bad people will always exist and they do not belong in my life. The bitterness I reserved for them on my LinkedIn profile allowed them to remain as burdens in my life. It is time to move on to greener pastures.

Readers will still see my Financial Sarcasm Roundups every week or so on this blog. I can still reserve my sharpest barbs for news makers whose affronts are too egregious for polite commentary. It is a weapon I should use sparingly rather than habitually. Maybe someone important will surprise me by making a smart decision for a change.

Public image is a component of leadership. Consider two different US Army generals in World War II: Joseph Stilwell and Dwight Eisenhower. Gen Stilwell's nickname was "Vinegar Joe" due to his penchant for sarcastic, prejudiced comments. Historians regarded him as marginally successful leading the China Burma India Theater, but he could have accomplished much more if he had gotten along with others. Gen. Eisenhower spent years cultivating an optimistic, confident outlook. His personal skills paid off in building the multinational coalition that liberated Europe. Gen. Stilwell is mostly a historical footnote today. Gen. Eisenhower's victories live forever in glory. How they viewed themselves and the world determined how they led their people.

One of the Internet memes going around is built on Ayesha A. Siddiqi's great Twitter quote, "Be the person you needed when you were younger." A growing child doesn't need a steady diet of vinegar. Optimism and confidence are much healthier.

The Financial Adviser's Standard Deception

I used to be a financial adviser a decade ago. I had no success at a wealth management firm from 2005-2006. I told dozens of prospects exactly what I would do and made good on my word. No one cared. I learned why after interacting with some of the humans who did succeed. Financial advisers and their sales managers have a large bag of tricks they deploy against clients.

One corporate trainer I encountered early in my financial career built his entire training script around pushing people's emotional buttons. Humans make decisions around greed and fear. Emotional impulses trigger rash, irresponsible decisions and lots of financial advisers count on that to make money. Cajoling a client into discussing their hopes and dreams reveals a host of emotional buttons the adviser will push. Like in sales jobs anywhere, a cynical understanding of human weakness pays off. The difference in financial sales is that pushing a short-term emotional button can harm a client's long-term financial worth if they're pushed into an expensive or unsuitable product.

Insincere commitment is another standard financial adviser trait. The best actors can portray sincerity. Sociopaths are also convincing when they say something knowingly false. Financial sales jobs attract large numbers of actors and sociopaths because they can be persuasive all day without troubling their souls. Detecting fake sincerity is difficult. Poker players and law enforcement officers are among the few professions who develop skills in reading people. Maybe fraud investigators for insurance companies can figure out liars. It takes time and practice to read someone's body language and facial expressions for the "tells" of insincerity.

I had no bag of tricks as a financial adviser. I relied upon my intellect and integrity, and I told my bosses that's exactly what I thought was most valuable about myself. My bosses laughed at me. They bragged that painting a dreamy picture in a client's imagination was more important than giving them what they said they wanted. In a bizarre way, their insights into human nature had some merit. Most humans prefer self-deception and will paradoxically respect those who deceive them. I refused to deceive my contacts and that's one big reason why they refused to entrust me with their wealth. The human race will need a strong evolutionary leap to validate my business approach.

Nota bene: I am not a financial adviser, and I have not been one since I left UBS in December 2006. Alfidi Capital is not a financial advisory firm or brokerage of any kind. Readers will only find the truth here, not advice or deception.

Thursday, November 12, 2015

Wednesday, November 11, 2015

Tuesday, November 10, 2015

Monday, November 09, 2015

The Haiku of Finance for 11/09/15

Impressive venture
Investors fully fund it
Pay for startup hype

Financial Sarcasm Roundup for 11/09/15

More Americans might be tuned in to my sarcasm if they weren't watching Monday Night Football or some cable TV movie. I might get more traffic if I convert my periodic sarcasm blast into a Netflix series.

One asset management firm thinks Chinese debt benefits from China's recession. The tortured logic right there just baffles me. Devaluing the yuan means a yuan-denominated bond's payment stream to Western investors will be worth less, not more. Buying notes issued by Chinese real estate developers means investors are hurt more by further crashes in a very inflated sector. Some money managers just can't let go of a thesis that no longer matches reality. The next bullish bet could be on wax paper rather than yuan paper, because it easily wraps fish from the live fish market. See, this investment thesis stuff is really easy.

China and the Middle East have an insatiable appetite for natural gas. The West is converting to locally available renewable energy while the developing world becomes even more dependent on hydrocarbons from beyond their borders. Addictions typically end badly. Going cold turkey in a couple of decades won't be an option for developing countries facing bad demographics.

Many European bankers are about to be jobless. Think of the fun they can have becoming tour guides for rich Chinese and Russian expatriates. The fired bankers didn't move fast enough to raise capital cushions. Now they can raise money for the Middle Eastern refugees flooding Europe. Grab those tin cups and hit the street corners in Munich and Prague. Bank CEOs can only fake the ECB's stress tests for so long. The money they save on compensation goes into the rainy day crisis buffer.

My sarcasm is way more entertaining than whatever is on television right now. Tune in again next time for another blast from Alfidi Capital.

Sunday, November 08, 2015

The Limerick of Finance for 11/08/15

Chain eateries give away food
Hoping diners will improve their mood
Something free with a meal
Good for a one-time deal
If it brings repeat business, it's shrewd

Saturday, November 07, 2015

The Haiku of Finance for 11/07/15

Spend on solution
High opportunity cost
Save time for more work

When To Trade Dollars For Hours

Productive people do not have enough hours in the day to accomplish all that they need to do. The cheapskates among them, including me, will push non-urgent tasks off to the next day. The more rushed or spendthrift among them will splurge for outside help. There may be a way to optimize the decision point prompting someone to choose spending money that saves time.

The idle rich have both money and time on their hands. Paying someone to do work they could easily learn to do themselves gives them even more time. It also gives them the psychological satisfaction of pushing around people who are far beneath them on the socioeconomic scale and bragging about it to their peers. I have met people like this in San Francisco and I do not ever want to be like them. The behavior is self-reinforcing and enhances class solidarity among the only social class that matters. It also carries moral peril. Devaluing human life is easy when the handiest measuring tool available is a checkbook.

Most outsourcing decisions are thankfully practical and born of necessity rather than luxury. Spending for expertise or other outside help makes sense if it obtains an otherwise remote level of quality. Opportunity costs are useful here. The cost of acquiring a skill or asset on one's own may be greater than the cost of hiring a ready-made capability.

I host my website with a cloud provider. It is far cheaper than buying my own server, learning to be a sysadmin and DBA,  and running a dedicated 24/7 high-speed connection just so the Alfidi Capital website is available all the time. I spent a smaller amount of money because the cloud's scale delivers a very efficient solution. We make the same decisions when we buy groceries instead of raising our own crops. Trading dollars for hours is easy when the benefit is immediately clear.

The choice is less difficult after calculating the DIY cost. If I absolutely cannot easily do something myself, and the cost of learning a new skill takes too much time away from my real money-making activities, then paying for an outside solution is acceptable to me. The choice is even easier if I don't have to directly engage a human being. I prefer that others do whatever they are meant to do in their lives. Their time should matter as much as mine.

Friday, November 06, 2015

The Haiku of Finance for 11/06/15

Never shortchange cash
Freebies do not pay the bills
Avoid tech serfdom

Never Shortchange Yourself In Tech-Land

I really got into a tussle yesterday on my friend's Facebook wall. Her immature "friends" were endorsing the non-cash benefits of employment at a very large, well-known tech company in Silicon Valley. I argued for ignoring the non-cash amenities and for prioritizing compensation. I was the lone voice crying out in the wilderness. I am right and everyone else is wrong.

Silicon Valley techies love to think of an employer as a substitute parent. Tech firms encourage this juvenile mentality with free food, on-site gyms and masseuses, video game break rooms, and other nonsense. The global firms with billions in revenue can afford to spend on this baloney. Startups that can't afford it with organic revenue convince their venture investors to subsidize them, like adult children whose parents cover their rent. Replicating a fun college campus is supposed to incentivize creativity. I think it's a misguided but unfortunately effective way of keeping highly productive workers psychologically attached to a big employer.

The workers who fall for this Silicon Valley wage slavery are usually highly logical in their daily work. It makes the seduction all the more befuddling until we consider behavioral economics. Humans are not as rational in making decisions in their personal lives as they believe themselves to be. We give more weight to recently acquired information, for example, than we should give to more thoroughly proven information learned at various points. The behavioral habits inculcated from daily trips to the free "campus" cafeteria and free yoga rooms are hard to break even when a competitor offers a five-figure cash raise.

I'll work the math for my super-smart Silicon Valley friends. Let's say I'm weighing two job offers, one with $20K more than I make now and the other with no raise but free food. Eating the equivalent of a $10 meal three times a day is a cost savings of $30 a day, which BTW is also a couple week's worth of groceries for the few Silicon Valley people proactive enough to plan their own meals like grown-ups. Anyway, I have digressed. The $30 savings over about 260 or so actual work days per year (not counting the weekends or a few holidays) comes to about $7800 in annual savings. Any proposed offer from a competitor that exceeds that $7800 after taxes and commuting costs is a step up in lifestyle. I would rather take the extra $20K if it meant I'm back to buying my own meals, because my penchant for cheap groceries means my bills will be much less than that $7800 meal cost avoidance. Too many very smart Silicon Valley engineers fail to run those numbers when weighing job offers. They stick with the free stuff and their employers know it. The HR people hidden on these big tech campuses know the math and that's why spending on free food matters more than cash bonuses.

Non-cash benefits are always ephemeral. Companies that hit a rough patch for a quarter or two cut back on frivolous expenses first, before they cut more important things like ad spending or the IT budget. They cut those other things too in recessions, right when they're about to cut people. The non-cash benefit of a corporate reputation also means just about nothing. The prestige of having a high-flying company's brand name on a resume means nothing without the personal pedigree to back it up. Plenty of people went to work at Webvan, Enron, Bear Stearns, and Lehman Brothers with high expectations before those firms collapsed. Top programmers are in demand because of their reputations earned at big firms, startups, hackathons, and academia. They are their own brand. I have a couple of top financial brands on my resume that mean nothing because elitists look down their nose at me. Prospective employees who prioritize a company's prestige and empty promises over cash have their priorities backwards.

I can't tell my fellow Bay Area professionals how to live their lives or spend their incomes. I am sometimes sad when I realize that so few of them think like me. Many STEM graduates work hard solving complex problems and not all of them are highly compensated. The enormous cognitive load of coding, designing, and diagramming all day must leave little energy left on the charter bus ride back home to think about gaining financial advantages. Maybe these top-notch Silicon Valley producers are just as immature as the spoiled brat trust fund kids and permanent adolescents I've met in San Francisco. They all need to get spanked. Adults work for money because that's what pays rent, taxes, insurance, college debts, and every other bill that would otherwise bring bankruptcy if left unpaid. Cash compensation enables wealth creation that accelerates retirement and makes our final years of life comfortable. San Francisco and Silicon Valley need to grow up. Part of growing up is learning not to sell yourself short. I will never shortchange my financial future in exchange for the phantom freedom of high-tech campus paternalism.