A New Idea on How to Motivate Employees
March 11th, 2010I liked this new idea on how to motivate employees:
A love affair with a fish
March 11th, 2010Great, great video from TED 2010 with chef Dan Barber about sustainable food.
Contango’s Strange Foray Into Gold
March 9th, 2010A very, very strange thing happened to a company I follow called Contango Oil & Gas (AMEX: MCF). This is an extremely well-run company that generates tons of cash from natural gas in the Gulf of Mexico. You couldn’t ask for a more efficient and well run company. Consider that Contango has raised $60.5 million in its life and yet has already bought back $65 million, thus having a negative capital situation due to negative dilution. Quite an astonishing task for a commodity company. Further the company’s costs are the lowest around with their find, develop and acquire costs at a measly $1.36 per mcf (thousand cubic feet).
Mr. Ken Peak, the CEO, is a straight shooter, no-nonsense kind of CEO. In fact, I wish most CEOs were more like him. In their last press release for earnings, Mr. Peak said, “Concerning natural gas prices, the weather is cooperating on the demand side, but natural gas supply continues to hold steady. I wouldn’t be surprised by either $3.00 or $6.00 natural gas over the next year or so, but we have good prospects and are aggressively moving forward to drill.” Now how many CEOs would have the guts to say that $3 mcf natural gas prices could happen? Compare him to Chesapeake Energy’s rather repugnant CEO, Aubrey McClendon, who is a perma-bull who enriches himself at shareholder’s expense and has created no value for shareholders.
For disclosure purposes, I have invested in Contango in the past and wrote a research report on it at $38.30, exclaiming how cheap it was. I have since taken my profits with its move to over $50 per share and reallocated my money elsewhere. I still follow Contango, in case it sells off again, and to see what Mr. Peak is doing.
So imagine my surprise when I see Monday’s press release, which has been getting absolutely zero press or news. Contango, which has been strictly an oil & gas company, announced that they were making an investment of up to $3 million in looking in Alaska for gold!
Here is what Mr. Peak said:
“This investment does not signal, foreshadow or represent a change in our natural gas and oil exploration business model. We recognize that the risks and challenges inherent in gold exploration are quite different from our natural gas and oil exploration business and were attracted to invest in this project solely by what we perceive to be its reward/risk ratio, where a relatively small amount of initial exploration risk capital ($3 to $5 million is envisioned) could potentially lead to a more extensive gold exploration/development project. Our 2009 exploration program found relatively few samples of commercial grade gold ore – generally considered to be 0.5 grams per tonne or more – but we believe our results merit an expanded exploration program for the summer of 2010.”
Mr. Peak continued, “Our planned 2010 exploration program will be directed toward additional rock sampling, trenching and drilling core holes. Shareholders are reminded that at this early exploration stage our investment should be considered as nothing more than an ‘interesting speculation’ and that the odds of our ultimately being successful in finding gold in a volume sufficient to support a commercial gold mining operation are quite low. To put it in oil and gas parlance, this ‘play’ is the rankest of ‘wildcats’ that is currently only at the ‘idea’ stage and we are hoping, based on our 2010 work program, to learn if we can mature it to the ‘prospect’ stage in order to justify committing additional risk exploration capital. After we have taken our core, rock and pan samples, they will be assayed in an independent lab and then evaluated for prospectivity and commercial development potential. This process will likely take until December 2010.” Here is the link to the release: Contango Gold Investment
I think this is a big warning sign. Neither Contango, nor Mr. Peak, as far as I know have any experience looking for gold, and the company has made all of its money on natural gas. This investment raises a host of questions. What also does it say about the natural gas market, or Mr. Peak’s view of it, that he would be willing to spend $3 million on gold instead of drilling for natural gas? What does it say about the value of Contango’s stock, that Mr. Peak would rather search for gold and not buy his own stock back?
But then I pause my this line of questioning and remember that Mr. Peak has been an excellent allocator of capital and has an excellent eye for value. So, I turn the question around and ask, what does it say about Mr. Peak and Contango’s thoughts on gold and the future of gold?
I think this news deserves a lot more attention and analysis. I know Contango is much smaller, but could you imagine if Exxon announced they were looking for gold? Ken Peak and Contango have an excellent reputation and are held in high regard, their decision should be viewed no less important than if a major such as Exxon had announced it.
The Simon/Ehrlich Bet
February 18th, 2010Paul Kedrosky wrote a blog post on his Infectious Greed site on the famous Simon/Ehrlich bet. Here is a snippet:
“After a decade of soaring commodity prices, plus related worries about resource scarcity, in 1980, Paul Ehrlich, a dour population ecologist, took up Julian Simon, a cornucopian economist, on a bet. Ehrlich (on paper) put equal mounts of money into five commodities (he selected chromium, copper, nickel, tin and tungsten) whose prices would, he thought, be higher a decade later. Higher prices meant Ehrlich won; lower prices meant Simon won. The loser paid the winner the difference.
Ehrlich lost. A decade later, in 1990, all five commodities’ prices were lower than they were in 1980. Unhappy at the outcome, Ehrlich complained that he hadn’t really wanted to bet on commodities in the first place. He offered Simon a new and more complex series of decadal bets – including things like carbon dioxide, AIDS prevalence, area of viable farmland, and so on. Simon turned that bet down, comparing it to betting on a football field’s condition rather than on the game’s outcome. There never was a second Simon/Ehrlich bet, and Julian Simon died in 1998.”
I highly encourage you to read the whole thing as it is excellent. Here is the link:Kedrosky post on Simon/Ehrlich Bet
Jamie Oliver’s TED talk
February 16th, 2010Best quote from the video: “We spend $150 billion a year on healthcare costs related to obesity.”
Parody of CNBC
February 12th, 2010This is a great parody of CNBC:
Moishe House in the NY Times
February 11th, 2010As I have written before I’m on the board of Moishe House foundation. The New York Times just profiled them in a wonderful write-up. Here is a snippet:
REBECCA KARP, Brian Cohen, Danielle Hardoon and Alissa Worly, all of whom are in their 20s, share a spacious red-brick house in Philadelphia. It rents for $3,200 a month.
Brian Cohen, Rebecca Karp and Alissa Worly, from left, three of the four roommates of Moishe House Philadelphia, share kitchen duties during a dinner at their home for other young Jewish adults. But they pay only a fourth of that. Every month, an organization in California sends a check for the lion’s share of the rent — $2,400 — directly to their landlord.Their benefactor is Moishe House, a nonprofit group founded in 2006 to help Jewish 20-somethings create communities. Its model is simple: Moishe House subsidizes the rent of groups of three to six residents, in exchange for their promise to organize events for other Jews in their 20s. Just four years old, it now has outposts in 29 cities, including Beijing, Cape Town and Warsaw.
Picture “Real World” — the MTV series — with challah.
Moishe House is run out of a rented office in Oakland, Calif. Its founder and executive director, David Cygielman, who is 28, said that its budget, provided through donations, is now about $1.35 million, or “about that of a medium-sized synagogue, and for that we do about 225 programs a month.”
Here is the link to the article: Moishe House NY Times article
Hugh Hendry on Greece and the Euro
February 10th, 2010I’m quickly becoming a huge fan of Hugh Hendry.
Investor A.D.D.
February 9th, 2010From 1940 to 1980, the average holding period that investors held on to stocks was as high as 10 years to as low as 4 years. Then in the 1980s, the holding period started to fall to as low as 1.5 years in the late 1980s, before a brief bounce to two years in the mid 1990s, and then it started to fall yet again. The average holding period for stocks now is 6 months.
Let me repeat that, in 2009 the average holding period that the average investor held stocks was a mere 6 months. With a time horizon of 6 months you are not an investor, you are a gambler. Because if you are holding a stock for just six months, you are betting not on a company’s fundamentals but on investor psychology and on prevailing market moods and trends.
I’m not here to moralize about this, but to present this as a tremendous opportunity. Investor A.D.D. and impatience is an opportunity of fantastic proportions as investors trade with the market, but not according to individual companies’ fundamentals. Let me give you an example.
I am building a new position in a cash cow of a company with a highly valuable recurring revenue business growing at 40%, with no debt and a lot of cash. In fact, the company is generating so much cash; they aren’t sure what to do with it. When the market started to weaken in mid-January, this company’s stock price suddenly fell 20% in a week on larger than normal volume. The company then released excellent earnings, higher than expected cash generation and increased guidance. The stock immediately recovered its losses and then some. Why was there so much selling before earnings? Investors or should I say “market gamblers” were moving with the market, not the company.
I continue to look to the long term and think there is a tremendous opportunity to arbitrage time and take advantage of the short-term thinking that so many “investors” are afflicted with. Cash doesn’t lie and accumulating a portfolio of cash generating companies at very attractive valuations will win out in the end.
Roundtable Investment Video
February 8th, 2010Run to watch this investment roundtable from Russia with Marc Faber, Hugh Hendry and Nassim Taleb. It is fantastic.
I cannot recommend this hour long video enough.
Investment Roundtable from Russia