Articles by mgedwards

The Monsoon Swoon

We’re in the middle of what I call "The Monsoon Swoon."  It is a literal and proverbial time of the year when life can feel a bit blasé.  Work is hopping as I try to get a couple of Americans out of the country.  However, our home life during the past couple of weeks seems to reflect the persistent monsoon season—it feels methodical, cyclical, and steady.  I don’t mean that life is depressing or melancholy; rather, it feels a bit meandering.  We are like branches and twigs floating in a steadily flowing river known as life.  Activities pass us by like debris, and tasks descend upon us like rivulets of water.  Life feels common and uneventful, yet always somewhat hectic as it pulls us along.  Above the busy undercurrents of life floats a persistent sameness.  All the while, interesting, enticing scenery surrounds us.  Such is life, ever progressing, oft restless, sometimes turbulent, and sometimes calm.

The Monsoon Swoon is a time when one anticipates the future while trying to enjoy the present, sobered by nostalgia for the recent past when life felt a lot more eventful.  In the U.S., this is a time one might describe as the "dog days of summer." In Korea, this time of the year might be more aptly described as the "raining cats and dogs days of summer."  It is a time when one wistfully looks forward to the day when the rain stops and the sweltering heat begins.  It’s a time when you might dare to look forward to the gorgeous fall season—until you realize that if it were fall, then the unforgiving winter would be fast approaching.

Although it rained today, the monsoon season this year has been drier than expected. The weather has been muggy but bearably cool.  Yesterday, the lawn dried out enough for me to mow, and I harvested the lush, grassy field.  My son and I headed to the pool again on Sunday so he could continue to learn how to swim.  I’m so proud of him.  He grabbed hold of a buoy, and I let him go and watched him kick his feet, propelling his body slightly forward. The buoy and life preserver kept him afloat. I returned the audio accessory I bought to fix the sound problem I’m having with the VCR I bought, and I resigned myself to return it to the e-tailer and buy a new VCR.  My family went back to Costco to buy a beautiful set of china my wife eyed during our last visit. On Saturday, I put in some overtime, and in the evening we joined our neighbors in Itaewon for dinner. We also visited a second-hand store, where my wife loaded up on a handful toys for my son. It was an incredible deal, but I have decided that second-hand stores are not my cup of tea.  All of these activities kept us busy over the past couple of days, and I enjoyed them.  Still, like the monsoon season, they were all familiar and cyclical.  They are all common diversions from “The Monsoon Swoon.”

A Rant about calling internationally

Dear reader,
 
I haven’t posted a Rant for awhile (that’s a good thing).  I have one today, though.  Every week or so I make calls on the weekend back to the United States.  The timing is tricky because the U.S. is between 14 and 17 time zones behind Korea.  Day there is night here, night there is day here, Saturday here is Friday there.  I call the U.S. regularly to keep in touch with family and friends back home.  I receive calls from back home occasionally, but about 95% of the international calls between Korea and the U.S. have been initiated by me.  Why?  I decided to take a break this weekend in mute protest.  Unfortunately, if I skip a week or two calling home, I end up feeling guilty.  I think it has to do with filial duty.  The phone is a two-way communications tool.  Why is it so hard for people from back home to pick up a phone and call their loved ones and friends overseas?  If you live overseas too, do you experience the same problem?  I’m sure you do.  Are you the one who always ends up making the phone call? 
 
In the past, I’ve also been guilty of not keeping in touch with those who live abroad.  Here’s an example that implicates me.  When my brother lived in Japan, he used to complain all the time that no one back home called him regularly.  You know, he’s right.  I now know exactly how he feels.  When I lived in the U.S. and he was in Japan, I kept telling myself, "Well, I really should call my brother."  I never did call him as regularly as he called me.  Now the same thing is happening here, although the role is reversed and I call him more than he calls me.  He calls me much more regularly than others, because he knows the distant feeling you often feel when you’re an expat.  I heard that a friend of mine back home asked my mother’s boss if we were coming back to the U.S. for Christmas this year.  Well, why not pick up a phone, call me, and find out firsthand?  I know it can be a little more expensive and a bit inconvenient, but it’s well worth the effort to the person you call.
 
If you know someone you care about who lives overseas, give them a call!  Figure out how to dial internationally.  They would love to hear from you.

Investment scorecard

This is a blog entry I’ve wanted to write for awhile, one of those back pocket subjects you may or may not be interested in reading.  I love investing.  I love buying and selling equities and mutual funds.  I’ve had mixed success over the years.  Before the dot.com craze, I knew very little about investing, and I didn’t have any money.  Then when the dot.com happened, the market piqued my interest, and I was lured by the siren’s sound of skyrocketing returns.  At the height of my early investing career, I sold my shares of IBM and Hewlett-Packard and plowed them into several technology stocks that I sorely regret buying.  Here’s a list of what I bought, in case you want a laugh–Webvan, which no longer exists and when down in a blaze of glory as one of the worst dot.com investments of all time, Infospace (INSP), which burned me twice, Palm (yes, that lovely PDA company that peaked and burned), and a couple of other forgettable technology stocks that also tanked.  I lost money during the dot.com bust just like everyone else, but since then I’ve wisened up.  My MBA taught me the basic principles of finance and investing such as the value of PE ratios and Betas, stuff that can be pretty boring but are critical to sound investing.  It also gave me the killer instinct when it comes to investing, and since 2002 my three-year return has been around 11%.  With the disclaimer that I’m far from a perfect investor and still make mistakes, I want to share some of the investments I’ve made in the last year.  If you’re interested in investing, I’ll also give you some suggestions on investments I haven’t made but have had my eye on.
  1. Google (GOOG):  Bought at $85/share, sold at $200.  Current price, $296.23/share.  I bought into Google at IPO last August and did very, very well in just a few months.  I sold early because I assumed Google would not go much higher than $235 per share.  I was wrong, but I was pleasantly surprised to see my faith in Google vindicated.  I do not recommend buying Google at nearly $300 a share.  If you bought if for much lower than that, keep it.  It is a good long-term investment.  Recommendation:  Hold.
  2. DreamWorks Animation (DWA):  Bought at $36/share, sold at $39/share.  Current price, 26.81/share.  This is the one that went sour.  DWA overpromised to investors, and there are now at least six class action lawsuits against DWA claiming CEO Jeffrey Katzenberg made false promises on the sales of "Shrek 2" DVDs.  Its main rival, Pixar, also tanked when sales of "The Incredibles" DVD underperformed.  I sold DWA before its 2nd quarter earnings were released, and I’m glad I did.  The overall valuation of CGI animation studios appears to be too high, and CGI animation appears to be peaking in popularity.  I don’t like the movies in the pipeline for DWA in the near future ("Walter & Gromit," "Over the Hedge").  DWA’s stock price probably won’t bounce back until next year, when "Shrek 3" hits theaters.  Recommendation:  Don’t buy it.
  3. Blue Nile (NILE):  Bought at $25/share, sold at $29/share, currently at $33.20/share.  I love this stock.  I met the CEO and love the concept of an online jewelry e-tailer.  Valuation is now high, but take a closer look at this one.  I sold at a profit and wish I had kept it for the long term.  Recommendation:  Weak buy.
  4. Infospace (INSP):  Bought at $48/share, currently at $33.98/share.  Twice bitten, should have been shy.  I listened to Fool.com and still believe in the long-term value of this company as a provider of online content.  INSP is especially strong in mobile services but heavily reliant on a couple of wireless providers.  I think it is a decent buy and have been disappointed that it isn’t doing well.  Take a closer look at INSP.  Recommendation:  Buy.
  5. Overstock.com (OSTK):  Bought at $69/share, currently at $39.36/share.  This is the worst investment I’ve made since the dot.com bust.  Again, I mistakenly listened to Fool.com (advice is cheap–go with your gut instinct).   Fortunately, like INSP, this time I only bought a few shares.  OSTK is a direct competitor to eBay, a David versus Goliath.  OSTK has a lot going for it, and eBay, other than Pay Pal, has had its share of difficulties lately.  OSTK’s primary problem is that it is sticking to a tried and untrue dot.com formula–focus on growth over profits.  It’s trying to get big fast, and Wall Street is punishing it for following this strategy.  The stock spiked at the end of 2004 when projections showed OSTK would turn a profit in early 2005.  It didn’t.  I think it will by early 2006.  I think it’s a long-term buy, but not till it’s profitable.  Recommendation:  Hold.
  6. Morningstar (MORN):  Bought at $18.50/share, now $28.79/share.  I turned my second most successful IPO after Google with this gem.  The king of investment research, Morningstar is a promising microcap with a marquee name in the financial world.  The CEO owns over 70% of outstanding shares.  If it can get past the SEC subpeona and potential conflict of interest, it is golden.  Valuation is rich now because Morningstar’s profitability has been spotty.  Recommendation:  Outperform.
  7. Cogent Technologies (COGT):  Bought at $22.50/share, now at $29.76.  Rated #1 microcap for 2005 by BusinessWeek magazine, this firm builds biometric systems used as security devices.  It IPO’d in 2004 at $15.50/share, peaked at $38/share, dropped to $19/share over share dilution concerns and concerns over sustainability outside government contracts.  The price spiked with the bombing in London.  This is a great long-term buy.  Recommendation:  Strong buy.

As you can tell, the common thread in the stocks listed above is that they’re heavily technology-based.  As Warren Buffett says, buy what you know, and I know techology better than any other sector.  However, here are some other investing candidates I chose not to invest in for the time being but still have my eye on.  They cover a range of sectors. 

  1. Archipelago Holding (AX):  The holding company of the electronic exchange is merging with the New York Stock Exchange, effectively making the NYSE a publically traded firm.  Valuation is high.  Recommendation:  Hold.
  2. Dell Computer (DELL):  Mature stock, but Dell is a must for any technology portfolio.  I almost bought DELL in late 2004, but the price spiked following excellent Q3 returns.  Dell will continue to dominate computing hardware.  Recommendation:  Buy.
  3. eBay (EBAY):  Everyone knows eBay.  eBay took a big hit earlier this year because its market is maturing.  It’s Pay Pal division is growing gangbusters and could become an alternative to credit cards.  If you own OSTK, don’t buy EBAY, and vice versa.  Of the two, eBay is a better buy now.  Recommendation:  Buy.
  4. Krispy Kreme Donuts (KKD):  This one-time darling stock with the world’s best-tasting donuts has fallen on hard times.  Wait and see what will happen, or make a bet while the price is low.  Recommendation:  Hold.
  5. Petrochina (PTR):  The U.S. ADR for one of China’s largest oil companies.  Warren Buffett owns a small stake, and it operates like a U.S. company.  Petroleum demand will remain strong, especially in China market, but Petrochina’s price has increased 85% since last August.  Wait and see what happens with CNOOC’s offer to buy Unocal.  If it fails, buy Petrochina.  Recommendation:  Hold.
  6. Salesforce.com (CRM):  Customer management Web services firm that competes with Siebel Systems.  High PE ratio, very rich valuation, but good long term potential.  Recommendation:  Don’t buy it. 
  7. Sears Holdings (SHLD):  Buyout artist Eddie Lampert merged Sears and Kmart into a single company.  Lampert hopes to turn SHLD into the next Berkshire Hathaway, Warren Buffett’s investment vehicle.  Combining two aging retailers, Sears and Kmart, into a single company is a crazy idea, but Lampert is crazy like a fox.  The cash they generate will allow him to make other Buffett-style purchases.  What about General Motors?  I should have boughten this at $96/share when I had the chance.  Recommendation:  Buy.

One last recommendation–check out Exchange Traded Funds (ETFs).  They are a great way to diversify and a good alternative to mutual funds, particularly index funds.