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Review Saturdays: Thoughts on “The 4-Hour Workweek”

February 11, 2012

A friend of mine recently recommended Timothy Ferriss’ hype machine book The 4-Hour Workweek. This friend of mine is pretty damn industrious, so I decided to give the book a shot. After cranking cover to cover in just about four hours — was this length planned Mr. Ferriss? — I walked away with a sense of empowerment. The true metric by which this book should be judged, in my view, is by whether or not this sense of pull myself up by the bootstraps optimism sustains itself within the reader after finishing the book. For me, the answer is no.

Coming soon: The 4-Hour Gunshow

I’m a sucker for self-help manifestos like this one. They’re easily digestible in one or two sittings, and the feeling of “I’m now ready to go change the world” after finishing is addictive. Ferriss’ offering to the genre are no exceptions. I really enjoyed reading about his background: how he became a world champion ballroom dancer in two years and how he  went from Japanophile nerd to champion of Chinese martial arts. I also found his story of founding an online nutritional supplements company to be interesting.

Ultimately, The 4-hour Workweek, is about efficiency. Ferriss has many good ideas, based on personal experience, about how to condense the amount of time spent on “work” to maximize the amount of time to pursue “play” and personal ventures. His ideas about minimizing checking email to once per day or less resonated strongly with me. I am now on an email diet — twice per day only, once in the morning and once at 3PM. I even reverted back from my iPhone to my circa 1995 Nokia brick for most things (granted, the iPhone still comes with me and comes out in dire situations). Many of Ferriss’ other ideas, however, fall a bit flat. The idea of hiring a personal assistant in India seems a bit slapdash to me. Sure it may be economical, but I wouldn’t want someone else taking care of anything in which I take personal pride. For me, this precludes almost everything I do, bringing me to my next point…

Ferriss implies that work is something that should be minimized and even averted. I strongly disagree. I would counter this implication with the notion that we should strive to be the same person at work that we are outside of work — that is, we should not repress our souls and interests at work. I’ve worked in the startup realm, consulting, and academia, yet I still strive to create my own working environment in which I can be effective without checking my awesome personality at the door. Perhaps this then is what Ferriss means. Working for 4-hours from home sounds pretty great, but I would prefer to work hard (and sometimes long) to reap greater rewards. Not to get too 1984, but the accomplishment I feel from actually working my ass off at something is paramount and unique.

I strongly recommend this book, if for nothing else, because it won’t take you more than 4 hours to read. After finishing The 4-Hour Workweek, I was left feeling parched for Steven Pressfield’s superior get-your-ass-in-gear manifesto, Do The Work.

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What earnings I’m playing today: PNRA and GD

October 25, 2011

Today, I will be shorting both PNRA and GD.

PNRA bit off more than they could chew with their Q3 guidance.

Why short PNRA?

Panera reports after the bell today (Oct. 25th). In the last four quarters, the company’s reported EPS exceeded Wall Street’s consensus estimates for quarters ended December 2010, March 2011 and June 2011, by margins of 3.40 percent, 1.90 percent and 0.90 percent.

For the third quarter, the company is expecting earnings per diluted share of $0.92 to $0.94, compared with $0.75 per diluted share in the third quarter of fiscal 2010. If the company meets this target, diluted earnings per share will grow 23 percent to 25 percent in the third quarter of fiscal 2011 versus the comparable period in fiscal 2010.

For the quarter ended September 2010, the reported EPS met Wall Street’s consensus estimate of $0.75 per share. PNRA has been beating estimates by increasingly small margins this year, and expectations are now very high for this stock, particularly after Chipotle continues to impress.

Why might I be wrong?

Chipotle operates in a similar market, $8-10 entrees, fancier than fast food, and recently cruised past earnings. If Chipotle is doing well, then so will Panera. They attract similar crowds, white collar people for lunch and dinner.

Why might the longs be wrong?

Expectations are very high for PNRA…to high in fact after Chipotle earnings. While Chipotle offers something unique – burritos with fresh ingredients at relatively low prices, Panera is in a sea of competitors. Given the less than optimal economic conditions of Q3, consumers would have been cutting back on expenses. This means going to Subway or Quizno’s for a somewhat cheaper sandwich than Panera. In short, Q3 guidance was too high and will finally surpass earnings.

 

 

Why short General Dynamics (GD)?

If you’re looking for an industry likely to be subject for reduced profit guidance, look no further than the defense sector. GD, a large government defense contractor and maker of private jet cabins, reports earnings before the bell Wednesday. Wall Street estimates for General Dynamics have been little changed thanks to the company beating expectations in each of the past four quarters. But given the likelihood of government spending cuts, General Dynamics might be at the end of a nice run. Wall Street expects General Dynamics to grow profits in 2012 by a very modest 5%. With GD shares trading for nine times current-year estimates, the stock is ripe for a 5%-plus reduction should future guidance disappoint.

Why might I be wrong?

The defense lobby is huge. Plus, there has been talk about large defense spending cuts for years with little to show for it.

Why the longs are wrong?

See here. Guidance will be the downfall of GD. Guidance will be conservative now, and the stock will bite the bullet now and shed 10% rather than shed 20% in Q1 2012 when big defense cutting legislation passes. GD is fairly diversified in terms of what it develops, and the planned defense cuts are across the board rather than sector-biased. Earnings will be fine but guidance will be weak.

 

Dropped the ball on NFLX

October 25, 2011

That one hurt. The company still has a sound business model and plenty of cash. A 28% drop AH seems like an overreaction to me, but so is the nature of tech stocks with small physical footprints.

It would also appear that the ERTS train left the station yesterday. It should still have some legs left in it this week and a run up to $28-29 level by week’s end is not out of the question.

Now off to redeem the NFLX play. Gotta keep on chuggin!

Not quite a T.O. drop, but close

Update: Netflix confirms UK launch

October 24, 2011

And so it begins!

Netflix announces UK launch

Play of the week: Get long NFLX and ERTS*

October 24, 2011

Again, today is Monday. Sorry your weekend-long keg stand had to come to an end. On the upside, it’s time for the play of the week! To make you feel better about your frat party induced hangover, I have two plays of the week!

Realistic war video games...sweet! Let's make some money, Blackwater style!

Get long NFLX.

Oh, how the mighty have fallen. After shedding 60% of it’s value in two months, NFLX reports Q3 earnings after the bell today (Monday). There is no doubt that Netflix’s new pricing plan ($7.99/mo for streaming plus $7.99/mo for DVD delivery) versus formerly $9.99 for both services combined will continue cause customers to move on from Netflix. The true reason for the price change is to set Netflix up for making moves abroad. Some analysts project up to 2 million more users dropping Netflix’s service, however I believe this is too much. DVDs are maturing, streaming is king. I think most users will be content paying the $7.99 for the streaming service rather than dropping their subscription completely. I certainly would shell out $7.99 to stream unlimited movies every month.

Consensus EPS expectation is $.95 on $811 mil in revenue. My projection is in the $.97-.98 range. Nothing spectacular, but a beat nonetheless.

The real kicker here is guidance! There is a huuuuuge untapped market outside the US that NFLX holds very little/no traction in. This new pricing plan was instituted to allow NFLX to move competitively into foreign markets. I expect the conference call to cover netflix’s plans to make moves abroad, as well as some ambitious projections. Look for guidance alone to boost NFLX 10% or more higher after hours.

Get long ERTS*

The reason for the star caveat is **drumroll please** Battlefield 3 reviews. That’s right, video game critics will have a huge say in this stock’s short-term movement. EA bet the house on developing Battlefield 3. The game is meant to be a direct competitor to Activision’s Call of Duty franchise. Last year, Call of Duty: Black Ops sold $500 million worth in it’s first week. That’s about 8 million copies in one week!!! You read that correctly. That’s James Cameron money. In fact, it’s more than James Cameron money.

EA has put together what looks to be a great game in Battlefield 3. Previews are all relatively positive. The game will finally be released on October 25th. There’s a big question mark here: EA gagged any early reviews by sending out a last minute patch for the game, so reviewers can’t review the game until they play the finalized version of the game, with the patch included. My question is why did they do this? Do they know reviews will not be as stellar as first expected? Tactics like this, not allowing reviews before release, are common in Hollywood when movies are much worse than expected. Reviews should start rolling out tomorrow, and if they are overwhelmingly positive (above 8.5 aggregate) , jump on this stock like you would on a grenade and your squad were in danger! If reviews are below an aggregate 8.5, most consumers will just wait for Call of Duty: Modern Warfare 3, which releases on November 11th. Believe me, these two franchises are largely substitutable. With the economy not looking too bright, I expect most consumers to only want to shell out $65 for one modern first-person shooter.

ERTS also reports Q3 on Thursday after the bell. Mobile and social numbers will be up, and we’ll get some nice sales updates about Battlefield 3. Guidance will be extremely positive, with The Sims and Battlefield 3 chalking up big revenue.

So in short, get long NFLX before close today and get long ERTS before earnings on Thursday IF and only IF reviews for Battlefield 3 are positive.

Here are some good websites for checking out Battlefield 3 reviews:

http://pc.ign.com/objects/142/14209865.html (UPDATE: IGN will release their Battlefield 3 review in one hour at 12:01 PST, Monday 10/24)

http://www.gamespot.com/pc/action/battlefield-3/index.html

Events in the week ahead

October 24, 2011

Today is Monday. In case you forgot, you can thank me later.

Let’s take a look at the key events coming up this week. The huge elephant in the room is obviously the EFSF meetings, which will conclude on Sunday. The tagline of this second meeting will be something like this: “EFSF 2: Return of the Deutsche Mark Jedi.” The other big event to watch is US Q3 GDP announcement on Thursday. Growth expected at 2.5%, up from 1.3% in Q2. Surprise to the downside is unlikely and would send an unwelcome tremor through the markets.

Here’s the full list of important events, courtesy of Zerohedge,

Monday 24th

Euro-zone Oct flash PMIs: Consensus expects the manufacturing PMI to fall by 0.4 to 48.5.

HSBC China Flash PMI: The last reading stood at 49.9. The latest one just printed at 51.1

Also Interesting: Fed Dudley speech, Israel monetary policy meeting is expected to leave rates unchanged.

Tuesday 25th

Germany Consumer Confidence: Consensus expects a virtually unchanged reading at 5.1.

Italy consumer confidence and retail sales: Given the focus on Italian debt sustainability in the market, retail sales and consumer sentiment may provide indications about cyclical strength. Consensus expects basically unchanged numbers.

Hungary MPC meeting: We and consensus expect rates to stay on hold at 6.0%.

BoC policy meeting: Consensus expects no change from 1.00%.

US Oct Consumer Confidence: Consensus expects 46 after 45.4 in Sep. This is the monthly Conference Board survey.
India Reserve Bank meeting: Markets expect the repo and reverse repo rates to get raised by 25bp to 8.50% and 7.50%.

Wednesday 26th

Australia Q3 CPI: We expect 3.5%yoy, in line with consensus after 3.6% in Q2.

US Sep Durable goods orders: Consensus expects -0.8%mom after -0.1% in Aug.

EU Summit: According to EU Commission President Barroso, final decisions about the Euro-area debt crisis will be made at this summit.

Also Interesting: US new home sales.

Thursday 27th

US Q3 GDP: We expect 2.5%, in line with consensus after 1.3% in Q2.

RBNZ Meeting: Consensus expects no change from 2.50%.

Riksbank Meeting: Consensus expects no change from 2.00%.

BoJ Meeting: We expect no change from 0.10%, in line with consensus.

Regional German CPI data: Last month, these numbers were the first to indicate rising inflation pressures in the Eurozone core.

Also interesting: US jobless claims, Speech by Bundesbank Chef Weidmann, Turkey trade balance (Sep).

Friday 28th

Japanese Inflation and Industrial Production: consensus expects the data to paint a deflationary picture with faster-falling price indices and a notable drop in IP (-2.1% mom)

Italian Bond Auction: This could well be one of the first serious tests to see if the EU summit earlier in the week helped improve market confidence.

Russia Monetary Policy meeting: We and consensus expect unchanged rates at 3.75%.

US Sep Personal Income: Consensus expects 0.3%mom after -0.1% in Aug.

US UMich consumer sentiment: This is the final reading, which is expected to show only very marginal improvements compared to the preliminary reading.

Swiss KOF leading indicator: This is expected to drop notably to about 1.04 from 1.21, according to GS and consensus.

Also interesting: UK consumer confidence.”

Source: http://www.zerohedge.com/news/key-events-week-ahead-0

 

“Earnings forecasts look less bright”

October 23, 2011

Earnings have not been bad at all so far. This is due to rollover from previous quarters, and in the case of banks, cough cough Citi, devious accounting tricks. However, guidance is not promising at all. Everyone sees the financial iceberg coming but no one can steer us clear of it. We are held on course by Europe’s debt troubles and congressional gridlock.

From Reuters:

“Third-quarter reports among the big names have been reasonably solid, with Google, McDonald’s and others reporting strong results.

But, unless there’s a turnaround in the outlook for the U.S. economy, the next few quarters may be less rosy.

[…]

At the same time, S&P 500 earnings forecasts for the fourth and first quarters have come down since the start of October, especially in the materials, energy and financial sectors, according to Thomson Reuters data.”

Full article here.