Contrarian Chronicles
Sign of trouble: A BlackBerry with your pizza
Papa John's Pizza has an amazing deal for you: Get a free BlackBerry if you order online. Signs that a company -- in this case, Research In Motion -- faces trouble are seldom so easy to read.
By Bill Fleckenstein
Over the years, it's been my experience that when you want to capture a "macro" event whose timing is quite uncertain, it's often better to wait and react to change, rather than try to anticipate that change. However, timing is less slippery on the micro, company-specific level where, potentially, anticipation has its "time" and place.
On the micro level, the warning sign could be something as odd as getting a popular high-tech gadget, the BlackBerry, when you order a pizza. We'll discuss that later.
But let's begin with a prominent macro event -- our current bubble in real estate. I've seen a fair amount of chatter (in the perverse, trying-to-be-contrary-to-be-contrary department) reasoning that since there's been so much talk about a bubble, there can't be a bubble.
For folks who want to make that argument, I offer up this headline (registration required) from the July 7 Seattle Times -- "Housing market sizzles -- shows no sign of bubble" -- and this lead-in to the story: "Buyers bid up prices. Fewer homes for sale, and they go fast; median price jumps 14%."
That oxymoronic headline sets the tone for what follows -- a very creative, though completely false, bit of analysis: "Despite conjecture that the local housing market is a high-priced bubble ready to burst, key signs of weakening are nowhere to be seen." Got that? The writer argues that if there is no inventory due to houses selling fast, housing can't be in a bubble.
False premise, real bubble
By her reckoning, a bubble has burst when "prices decline; the number of homes for sale grows; and it takes longer to sell them." She feels that the last two aren't occurring (as stated in the lead-in). Ergo, we can't have a bubble. She appears to argue that, to be in a bubble, the housing market must be ready to burst. Since it's not ready to burst, it can't be a bubble.
That silly analysis aside, somewhere along the way I expect to see an event (or group of events) signaling that the housing bubble is finished. Exactly what that event might be or look like -- or whether it comes from a financial intermediary, some group of speculators or one particular community -- I don't know. But I hope to recognize it when I see it.
(As I discussed in my June 13 column, it's certainly time to pay attention when Time puts "Home $weet Home: Why We're Going Gaga Over Real Estate" on its cover. But that says "pay attention," rather than take action -- as no matter how fervently I believe in this usefulness as an indicator, it's still just a theory.)
In any case, it's after this event has occurred that it will be time to take action against the beneficiaries of the housing ATM, if one is so inclined. (Of course, the list of housing-ATM beneficiaries is practically the entire U.S. economy, but that is a discussion for a later date.)
Guidance that comes gift-wrapped
On the micro, company-specific level, you often have a better idea of when something you expect to occur might actually take place. There are regularly scheduled updates in the form of quarterly earnings releases, as well as other data points. I often attempt to anticipate corporate-specific events because I can triangulate on the timing, especially in technology, where so many companies are interrelated.
Thus, if you expect that something may be about to change (as signaled, for instance, by "missing a quarter"), it's possible to get into position and anticipate an event because you have a specific date when data will be divulged that may change people's opinions. (Of course, that doesn't mean you're going to be right in your expectation.)
Four and 20 BlackBerrys baked in a pie
Stopping for a moment in the delicious-data department: Last Tuesday, a friend forwarded an annoying press release that has to go down as one of the goofiest promotions of all time. Papa John's (PZZA, news, msgs) has announced an offer -- in partnership with Research In Motion (RIMM, news, msgs), I assume, since Papa John can't be covering the cost of these gadgets -- where if you order a pizza online, you can get a free BlackBerry 7100G handheld device.
According to Papa John's release: "To take advantage of the offer, customers must order online via www.papajohns.com and add to their pizza order two 20-oz. beverages and choice of any delicious side item."
(Additionally, customers must purchase "a new two-year voice and data service plan," and send in for a company rebate.)
So, let me see if I get this: If you buy a couple of Cokes and some chicken strips or bread sticks, that is considered to be fair trade for a BlackBerry. You don't have to be too close to the technology business to understand that this is an act of desperation. There are too many BlackBerrys out there, and Research in Motion needs to move them.
You could argue that getting a free BlackBerry with airline tickets or hotel reservations might make sense, as the demographics match up. And you might get a bona fide user from the offer. But it stretches credulity to think that, because a person orders a Papa John's pizza, he's exactly the right person to pay $40 a month for constant contact with his e-mail.
To repeat, this can only be viewed as an act of desperation. I continue to feel that the clock is ticking against Research In Motion. One of these days, there's going to be a serious implosion in that stock.
Antennae up for inflection points
Returning to stocks generically, it's important to differentiate in your own mind whether you actually have a catalyst, versus just a hunch, for the action you're taking. I think it's human nature to want to anticipate change and get in position before it happens. Sometimes that is possible -- but not always. Without having a sense of what will change psychology (and when), you're essentially resorting to hope if you take a position.
Hopefully, that discussion of reacting and anticipating will be useful to others, as Mr. Market has exacted a large tuition from me for conveying those lessons.
For those who enjoy stories about pizza
cheers d998
Sign of trouble: A BlackBerry with your pizza
Papa John's Pizza has an amazing deal for you: Get a free BlackBerry if you order online. Signs that a company -- in this case, Research In Motion -- faces trouble are seldom so easy to read.
By Bill Fleckenstein
Over the years, it's been my experience that when you want to capture a "macro" event whose timing is quite uncertain, it's often better to wait and react to change, rather than try to anticipate that change. However, timing is less slippery on the micro, company-specific level where, potentially, anticipation has its "time" and place.
On the micro level, the warning sign could be something as odd as getting a popular high-tech gadget, the BlackBerry, when you order a pizza. We'll discuss that later.
But let's begin with a prominent macro event -- our current bubble in real estate. I've seen a fair amount of chatter (in the perverse, trying-to-be-contrary-to-be-contrary department) reasoning that since there's been so much talk about a bubble, there can't be a bubble.
For folks who want to make that argument, I offer up this headline (registration required) from the July 7 Seattle Times -- "Housing market sizzles -- shows no sign of bubble" -- and this lead-in to the story: "Buyers bid up prices. Fewer homes for sale, and they go fast; median price jumps 14%."
That oxymoronic headline sets the tone for what follows -- a very creative, though completely false, bit of analysis: "Despite conjecture that the local housing market is a high-priced bubble ready to burst, key signs of weakening are nowhere to be seen." Got that? The writer argues that if there is no inventory due to houses selling fast, housing can't be in a bubble.
False premise, real bubble
By her reckoning, a bubble has burst when "prices decline; the number of homes for sale grows; and it takes longer to sell them." She feels that the last two aren't occurring (as stated in the lead-in). Ergo, we can't have a bubble. She appears to argue that, to be in a bubble, the housing market must be ready to burst. Since it's not ready to burst, it can't be a bubble.
That silly analysis aside, somewhere along the way I expect to see an event (or group of events) signaling that the housing bubble is finished. Exactly what that event might be or look like -- or whether it comes from a financial intermediary, some group of speculators or one particular community -- I don't know. But I hope to recognize it when I see it.
(As I discussed in my June 13 column, it's certainly time to pay attention when Time puts "Home $weet Home: Why We're Going Gaga Over Real Estate" on its cover. But that says "pay attention," rather than take action -- as no matter how fervently I believe in this usefulness as an indicator, it's still just a theory.)
In any case, it's after this event has occurred that it will be time to take action against the beneficiaries of the housing ATM, if one is so inclined. (Of course, the list of housing-ATM beneficiaries is practically the entire U.S. economy, but that is a discussion for a later date.)
Guidance that comes gift-wrapped
On the micro, company-specific level, you often have a better idea of when something you expect to occur might actually take place. There are regularly scheduled updates in the form of quarterly earnings releases, as well as other data points. I often attempt to anticipate corporate-specific events because I can triangulate on the timing, especially in technology, where so many companies are interrelated.
Thus, if you expect that something may be about to change (as signaled, for instance, by "missing a quarter"), it's possible to get into position and anticipate an event because you have a specific date when data will be divulged that may change people's opinions. (Of course, that doesn't mean you're going to be right in your expectation.)
Four and 20 BlackBerrys baked in a pie
Stopping for a moment in the delicious-data department: Last Tuesday, a friend forwarded an annoying press release that has to go down as one of the goofiest promotions of all time. Papa John's (PZZA, news, msgs) has announced an offer -- in partnership with Research In Motion (RIMM, news, msgs), I assume, since Papa John can't be covering the cost of these gadgets -- where if you order a pizza online, you can get a free BlackBerry 7100G handheld device.
According to Papa John's release: "To take advantage of the offer, customers must order online via www.papajohns.com and add to their pizza order two 20-oz. beverages and choice of any delicious side item."
(Additionally, customers must purchase "a new two-year voice and data service plan," and send in for a company rebate.)
So, let me see if I get this: If you buy a couple of Cokes and some chicken strips or bread sticks, that is considered to be fair trade for a BlackBerry. You don't have to be too close to the technology business to understand that this is an act of desperation. There are too many BlackBerrys out there, and Research in Motion needs to move them.
You could argue that getting a free BlackBerry with airline tickets or hotel reservations might make sense, as the demographics match up. And you might get a bona fide user from the offer. But it stretches credulity to think that, because a person orders a Papa John's pizza, he's exactly the right person to pay $40 a month for constant contact with his e-mail.
To repeat, this can only be viewed as an act of desperation. I continue to feel that the clock is ticking against Research In Motion. One of these days, there's going to be a serious implosion in that stock.
Antennae up for inflection points
Returning to stocks generically, it's important to differentiate in your own mind whether you actually have a catalyst, versus just a hunch, for the action you're taking. I think it's human nature to want to anticipate change and get in position before it happens. Sometimes that is possible -- but not always. Without having a sense of what will change psychology (and when), you're essentially resorting to hope if you take a position.
Hopefully, that discussion of reacting and anticipating will be useful to others, as Mr. Market has exacted a large tuition from me for conveying those lessons.
For those who enjoy stories about pizza
cheers d998
