So let me ask a follow up question. How do you and your dealer know that your leased car's residual value is less than the market value? Answer – because there is a robust 3rd party market for those vehicles. Compile the national data from the auction sales, extrapolate the differences between sold cars and yours (basically mileage and options) and you have a pretty good idea of what is happening.
But what if Tesla grabs a good portion of that data because they are running the leased cars through their own system and not sharing that data. Thinner public sales means you need to kick out your confidence intervals. This strengthens Tesla's hand because they actually know what is going on.
I am pushing things a little, but I can see this giving Tesla a slight advantage.
Well, no – not directly – that is why I said subtle. An analogy might be made to Apple's iPhones. Apple can't legally prevent you from going to a 3rd party repair shop. However, they do make things difficult. If you do so you void the warranty, they use special screws, they don't publish repair manuals, etc. I think this might be more akin to a nudge than a full out assault.
You are half right - but that means you kind of misses my point. What happens to leased cars after they are returned?
Technically they revert to the leasing company, not the dealership or manufactory. In practice this means that they get dumped onto the used car market. This means when the lease holder drops off the car at the dealership (which is a franchise) at the end of the lease, they tend to have the same dance as when bringing in a trade in. Not exactly the same – leases throws in some weird quirks – but it is in the same class.
I have seen some weird conflicts of interest between dealerships and manufactures. Manufactory put out a sweet lease deal 2 to 5 years ago, and then the cars start getting returned with a high residual value, so there is a large dump of overpriced vehicles onto the used market. Nobody comes out a winner here.
Which is why I think Tesla might be doing this. It would give them greater control over their used car market.
As for not owing the car – technically correct but that misses some points. In some ways it is better than owning a car. All auto leases have option for you to buy the car at the end of the lease. This puts the leaseholder in the proverbial driver's seat. I have seen people execute the option, buy out the car, then turn around and sell the car for a higher price. I have seen other people return the car and then buy it back from the dealership for thousands less. (Personally, I don't like leases because I think they have a higher total cost of ownership. But that would be a different thread.)
1. Almost all auto dealerships are franchise operations. Tesla owns theirs outright. 2. Most used cars are not sold through a dealership.
Private sales and 3rd party dealerships are common.
Even when somebody trades in used vehicle for a new one it rarely shows up on that dealer's lot. Normally it goes to auction where some other used car dealer buys it up.
Is this a subtle assault on the 1st sale doctrine, keeping the cars within Tesla's system?
Sure. Can you be a bit more specific on what you are looking for? The M&A academic field is huge. Do you want to talk about 1980s style turn and burn? Those where abusive thanks to a flaw in pension accounting. However, that flaw has been fixed. Zombie companies? Bank mergers of the 90s? Give me some place to start.
Shouldn't the diversity crusaders be making waves calling for more male enrollment in fashion?
I think you are missing a subtle point. Men do enroll in fashion, it's women who don't enroll in auto repair. Men are in widely dispersed fields, women tend to clump in a few. Even within a field, such as law, women tend to clump within a discipline. Oddly enough, they tend to clump in professions that offer good life / work balance. Culturally they are still expected to take care of the kids and grandparents - so no - I don't think they should shut up. However, this means there are too many women pursuing the same job thus driving down wages, so the current generation is screwed. But they did better than the last and hopefully the next will do even better.
The study was done on Americans between 57 and 85, so we can strike most of your objections. I don't think many died from gas leaks or rancid food.
The researches did consider the link between smell, apatite, and caloric intake and where able to account for that. So strike that.
A hint is that the study was inspired for the search for neurological diseases such as Alzheimer’s and Parkinson’s. Being able to smell depends on stem cells rejuvenating the bits of the nose that we smell with. If those stem cells stop rejuvenating, does that mean that brain cells stop rejuvenating? The nose is the only sense that is directly connected to the brain. The jurry is still out on that question – but that is why I think it is a promising line of research.
The "Corn Flake" issue does not apply here. If that were true than people who could smell and had cancer would die at about the same rate as those who could not smell and never have had cancer.
A big issue is the small study size with limited data.
So, it more points to promising lines of research than proving anything.
It is not so much that it is hot - which is a facotr - but that the system was not set up to handle something like this. Most of the reports I have heard have talked about nurses not being trained in infection control, hospitals running out of gloves, masks, disinfectant, etc.
If I understand correctly, while there have been about 150 doctors and nurses who have died from the disease, none of them were wearing protective suits. In fact, all of them were working in 2nd tier clinics. All of these clinics had poor to no infection controls in place. Nobody has died in a major hospital which had infection controls in place. This strain of Ebola is not airborne – yet.
What you say is true - for today. Bu t I still think it is the thin wedge that Apple will use to get into the payment transactions. Apple is not going to stop where it is at. But right now PayPal is kind of dead in the water. What is the last big thing that they did. While not a direct move on PayPal this is a bucket of cold water on PayPal's face, telling them to wake up and start moving.
Look at the PayPal's press from 15 years ago. They were going to revolutionize the payment industry – distributing old players. Read BitCoin's press from last year and you get the idea.
And then for the next 10 years . nothing. Don't get me wrong, it is a nice niche player but it has not innovated like Square.
And now comes Apple. One Touch was what PayPal was promising 15 years ago. I suspect this is just the first narrow wedge. Apple will expand its payment services.
So how is PayPal going to get its grove back? Shuffling the boxes on a company's org chart is probably just step one.
Anecdotal evidence. You have 1 example. Here are my 3.
Warren Buffet's hostile bid on fabric manufacturer Berkshire Hathaway Steve Jobs vulture bid on hardware manufacturer Pixar KKR's hostile bid for RJR Nabisco, where executive where lining their pockets at the expense of shareholders.
Which takes us to being a Monday morning quarterback or a armchair general. Not know the particulars of your experience, most of the “striping” operations are over zombie companies that are slowly dying – worth more dead than alive. Isn't it better to do something with them before they are completely run into the ground?
And yes, like you, I have been though one of these as a employee.
Hey, have you read “Barbarians at the Gate?”. It is a old but good book.
O.K., let walk though the logic. eBay is currently at $56.30. Let us assume you own eBay. Ergo, this mean you think it is undervalued.
First question, would you be willing to by my stock in eBay at $75? $60? 56.80?
Second question, if it is undervalued, why are you not buying up eBay until it's fair value? You have a compelling story and strong logic. Why not try to convince your friends to by the stock and charge them a fee? That is what essentially Hedge Fund managers do.
Third question – can you tell me specifically why you think eBay is priced below it's fair value. Using your logic every single stock being traded is being traded below it's fair value.
I can answer part of your third question. Some people buy stock because they want to own a fraction of future earnings. Other people hold onto the same stock because they think the company sucks but that there will be some type of catalytic event that will release shareholder value – such as an outside hostile bidder that will buy out the company, kick out the incompetent managers, and turn the company around.
Of course, it all comes down to one's opinion – right? When there is a hostile bid there is no reasons why people like you can't bid the stock up to the right level – it has happened . But when managers fight are they fighting for you for your own jobs. I will point out that 9 times out of 10, when a hostile takeover is launched – or even just a proxy fight – things happen. The company decides to sell itself off to another company, major restructurings, mass firings of board members.
The Master Card is a example of a "branded' cards – it carries the Pay Pal's brand but issued by a unrelated 3rd party bank. It is the 3rd party bank that has to deal with the heavy regulations of being a bank. I would also guess they pick up most of the profits.
The Dollar General is an example of Pay Pal being a "money transfer agent" – which has very low regulations. So while it is a financial institution, it is not acting as a full blow "bank".
That is an exclent example to my point. BillMeLater is explicitly not a bank and does not offer loans, credit card services etc. It is a payment system. The "Bill Me Later" part is handled by a outside 3rd party - Comenity Capital Bank
Yes – the reason to merge is to "synergize." However, you are assume that mergers always lead to the expected benefits. This only actually happens about 1/3 of the time. About a 1/3 of the time you get "bleh". And about 1/3 of the time you get dissynergies. Not all marriages work out to be happily ever after.
I don't think you mean "Arbitrage" – I think you mean Mergers and Acquisitions. There was something called "Mergers Arbitrage" back in the 80s, but mostly that was speculators hiding behind the boring name of "Arbitrage".
And no, your logic does not make sense. The only reasons as a stockholder that I would agree to a merger or acquisition is because it would make money for myself. Do other parties make money off the deals – yes. Do they take too large of a cut of the profits? O.k. But your logic is arguing that newspapers hire journalist to burn down factories so they can sell stories about fires. I mean this has happened in the past but it is now how newspapers survive day to day.
There is a huge regulatory difference. (At least from the US perspective. I think Europe is roughly in line.)
Pay Pal is currently a "money transfer agent". That has fairly light regulatory requirements, mainly around money laundering.
If Pay Pal began offering financial services – like credit cards, then it would be treated as a real bank. This means a whole new world in terms of regulations. It also means that the Federal Reserve would not only regulate Pay Pal but would also regulate eBay as a bank holding company.
First, it has nothing to do with Alibaba's IPO and everything to do with Apple's new one touch payment.
Second, being opposed to hostile takeover is a bad thing. I will put it simply, if you owned some stock of eBay, why would you want to discourage somebody offering you a price that is higher than it is trading for today? I mean, yes, one could insert poison pills and stuff to damage and tarnish your stock, decreasing it's value so people would stay away, but once again why?
Most of the time it is managers, not the owners, who are opposed to hostile takeover. They face a bum choice. They could work hard to keep the stock price. Or they could slack off, be bought up, and then be fired. Of course they have pay packages in the millions so I don't feel too sorry for them.
I am not sure what you mean by "a properly-regulated insurance industry regulates itself." I am sensing a paradox between "properly-regulated ", which implies external, and "regulates itself", which implies internal. So I am not sure what you are trying to say.
But on to your point. Everything you say is true about property insures and CDS. Both tend to low ball rates to collect today's bonus. Both structure their contacts to minimize moral hazard. Investors in both lose money when the insurance company behaviors irrational.
And both buy and sell insurance on "assets" which the policy holder's don't own in unregulated markets. I will use California earthquake insurance as a specific example. Insurance companies that offer earthquake insurance don't have enough assets to cover all claims in the event of an earthquake. In order to cover their potential losses they buy re-insurance policies or sell catastrophe bonds (a.k.a. cat bonds). The insurance company then turns around and sells re-insurance policies or buys cat bonds in some other area – Tokyo earthquakes, Gulf hurricanes, etc. None of these are tied to a specific asset to needs to be damaged in a California earthquake but are instead tied to a generic event. Since it is tied to a generic event, these polices can be standardized and thus lower costs.
I will point out that before re-insurance and cat bonds, natural disasters would always wipe out an insurance company or three. However, thanks to these unregulated securities which insure items that people don't own, insurance companies no longer go bust. Which suggests that the implantation of CDS (low rates due to a credit bubble pushing down real yields, with everybody searching out for an extra 10 bps) rather than the idea that was flawed.
"Hollowing Out" is a valid concern, but let me make an argument on being "stuck in the middle".
One can either thrive by either being a low cost provided or by differentiation. If you go the low cost route, you squeeze every penny out of production and thus tend to offer generic products. If you go the differentiation route you get to charge premium prices but you also have to offer more expensive custom products. Wal-Mart or Sacks. Companies that try to do both tend to failure miserable at both.
As an aside, I once worked in an upscale subsidiary in a mass market company. Everybody was miserable. The subsidiary did much better when it was spun out of the parent company.
Which takes us back to IBM. What core skills are they losing? They are still making servers, so not those skill sets. What they are losing are the mass manufacturing / distribution skills, which I count as a modest loss.
Slashdot Mirror
Are you sure? I thought that GM and Chrysler had to sell their finance division when they slid into bankruptcy.
So let me ask a follow up question. How do you and your dealer know that your leased car's residual value is less than the market value? Answer – because there is a robust 3rd party market for those vehicles. Compile the national data from the auction sales, extrapolate the differences between sold cars and yours (basically mileage and options) and you have a pretty good idea of what is happening.
But what if Tesla grabs a good portion of that data because they are running the leased cars through their own system and not sharing that data. Thinner public sales means you need to kick out your confidence intervals. This strengthens Tesla's hand because they actually know what is going on.
I am pushing things a little, but I can see this giving Tesla a slight advantage.
Well, no – not directly – that is why I said subtle. An analogy might be made to Apple's iPhones. Apple can't legally prevent you from going to a 3rd party repair shop. However, they do make things difficult. If you do so you void the warranty, they use special screws, they don't publish repair manuals, etc. I think this might be more akin to a nudge than a full out assault.
You are half right - but that means you kind of misses my point. What happens to leased cars after they are returned?
Technically they revert to the leasing company, not the dealership or manufactory. In practice this means that they get dumped onto the used car market. This means when the lease holder drops off the car at the dealership (which is a franchise) at the end of the lease, they tend to have the same dance as when bringing in a trade in. Not exactly the same – leases throws in some weird quirks – but it is in the same class.
I have seen some weird conflicts of interest between dealerships and manufactures. Manufactory put out a sweet lease deal 2 to 5 years ago, and then the cars start getting returned with a high residual value, so there is a large dump of overpriced vehicles onto the used market. Nobody comes out a winner here.
Which is why I think Tesla might be doing this. It would give them greater control over their used car market.
As for not owing the car – technically correct but that misses some points. In some ways it is better than owning a car. All auto leases have option for you to buy the car at the end of the lease. This puts the leaseholder in the proverbial driver's seat. I have seen people execute the option, buy out the car, then turn around and sell the car for a higher price. I have seen other people return the car and then buy it back from the dealership for thousands less. (Personally, I don't like leases because I think they have a higher total cost of ownership. But that would be a different thread.)
1. Almost all auto dealerships are franchise operations. Tesla owns theirs outright.
2. Most used cars are not sold through a dealership.
Private sales and 3rd party dealerships are common.
Even when somebody trades in used vehicle for a new one it rarely shows up on that dealer's lot. Normally it goes to auction where some other used car dealer buys it up.
Is this a subtle assault on the 1st sale doctrine, keeping the cars within Tesla's system?
If that were true, wouldn't they be picking Detroit instead? I mean, it is in bankruptcy. You should be able to pick it up for pennies on the dollar.
Sure. Can you be a bit more specific on what you are looking for? The M&A academic field is huge. Do you want to talk about 1980s style turn and burn? Those where abusive thanks to a flaw in pension accounting. However, that flaw has been fixed. Zombie companies? Bank mergers of the 90s? Give me some place to start.
Shouldn't the diversity crusaders be making waves calling for more male enrollment in fashion?
I think you are missing a subtle point. Men do enroll in fashion, it's women who don't enroll in auto repair. Men are in widely dispersed fields, women tend to clump in a few. Even within a field, such as law, women tend to clump within a discipline. Oddly enough, they tend to clump in professions that offer good life / work balance. Culturally they are still expected to take care of the kids and grandparents - so no - I don't think they should shut up. However, this means there are too many women pursuing the same job thus driving down wages, so the current generation is screwed. But they did better than the last and hopefully the next will do even better.
The study was done on Americans between 57 and 85, so we can strike most of your objections. I don't think many died from gas leaks or rancid food.
The researches did consider the link between smell, apatite, and caloric intake and where able to account for that. So strike that.
A hint is that the study was inspired for the search for neurological diseases such as Alzheimer’s and Parkinson’s. Being able to smell depends on stem cells rejuvenating the bits of the nose that we smell with. If those stem cells stop rejuvenating, does that mean that brain cells stop rejuvenating? The nose is the only sense that is directly connected to the brain. The jurry is still out on that question – but that is why I think it is a promising line of research.
The "Corn Flake" issue does not apply here. If that were true than people who could smell and had cancer would die at about the same rate as those who could not smell and never have had cancer.
A big issue is the small study size with limited data.
So, it more points to promising lines of research than proving anything.
It is not so much that it is hot - which is a facotr - but that the system was not set up to handle something like this. Most of the reports I have heard have talked about nurses not being trained in infection control, hospitals running out of gloves, masks, disinfectant, etc.
Can you give us a cite?
If I understand correctly, while there have been about 150 doctors and nurses who have died from the disease, none of them were wearing protective suits. In fact, all of them were working in 2nd tier clinics. All of these clinics had poor to no infection controls in place. Nobody has died in a major hospital which had infection controls in place. This strain of Ebola is not airborne – yet.
What you say is true - for today. Bu t I still think it is the thin wedge that Apple will use to get into the payment transactions. Apple is not going to stop where it is at. But right now PayPal is kind of dead in the water. What is the last big thing that they did. While not a direct move on PayPal this is a bucket of cold water on PayPal's face, telling them to wake up and start moving.
Look at the PayPal's press from 15 years ago. They were going to revolutionize the payment industry – distributing old players. Read BitCoin's press from last year and you get the idea.
And then for the next 10 years . nothing. Don't get me wrong, it is a nice niche player but it has not innovated like Square.
And now comes Apple. One Touch was what PayPal was promising 15 years ago. I suspect this is just the first narrow wedge. Apple will expand its payment services.
So how is PayPal going to get its grove back? Shuffling the boxes on a company's org chart is probably just step one.
Anecdotal evidence. You have 1 example. Here are my 3.
Warren Buffet's hostile bid on fabric manufacturer Berkshire Hathaway
Steve Jobs vulture bid on hardware manufacturer Pixar
KKR's hostile bid for RJR Nabisco, where executive where lining their pockets at the expense of shareholders.
Which takes us to being a Monday morning quarterback or a armchair general. Not know the particulars of your experience, most of the “striping” operations are over zombie companies that are slowly dying – worth more dead than alive. Isn't it better to do something with them before they are completely run into the ground?
And yes, like you, I have been though one of these as a employee.
Hey, have you read “Barbarians at the Gate?”. It is a old but good book.
O.K., let walk though the logic. eBay is currently at $56.30. Let us assume you own eBay. Ergo, this mean you think it is undervalued.
First question, would you be willing to by my stock in eBay at $75? $60? 56.80?
Second question, if it is undervalued, why are you not buying up eBay until it's fair value? You have a compelling story and strong logic. Why not try to convince your friends to by the stock and charge them a fee? That is what essentially Hedge Fund managers do.
Third question – can you tell me specifically why you think eBay is priced below it's fair value. Using your logic every single stock being traded is being traded below it's fair value.
I can answer part of your third question. Some people buy stock because they want to own a fraction of future earnings. Other people hold onto the same stock because they think the company sucks but that there will be some type of catalytic event that will release shareholder value – such as an outside hostile bidder that will buy out the company, kick out the incompetent managers, and turn the company around.
Of course, it all comes down to one's opinion – right? When there is a hostile bid there is no reasons why people like you can't bid the stock up to the right level – it has happened . But when managers fight are they fighting for you for your own jobs. I will point out that 9 times out of 10, when a hostile takeover is launched – or even just a proxy fight – things happen. The company decides to sell itself off to another company, major restructurings, mass firings of board members.
It is in there. The plan was to violate copyright holders today, build up the business, ask for forgiveness, and then negotiate licensing fees.
More excellent examples.
The Master Card is a example of a "branded' cards – it carries the Pay Pal's brand but issued by a unrelated 3rd party bank. It is the 3rd party bank that has to deal with the heavy regulations of being a bank. I would also guess they pick up most of the profits.
The Dollar General is an example of Pay Pal being a "money transfer agent" – which has very low regulations. So while it is a financial institution, it is not acting as a full blow "bank".
That is an exclent example to my point. BillMeLater is explicitly not a bank and does not offer loans, credit card services etc. It is a payment system. The "Bill Me Later" part is handled by a outside 3rd party - Comenity Capital Bank
Yes – the reason to merge is to "synergize." However, you are assume that mergers always lead to the expected benefits. This only actually happens about 1/3 of the time. About a 1/3 of the time you get "bleh". And about 1/3 of the time you get dissynergies. Not all marriages work out to be happily ever after.
I don't think you mean "Arbitrage" – I think you mean Mergers and Acquisitions. There was something called "Mergers Arbitrage" back in the 80s, but mostly that was speculators hiding behind the boring name of "Arbitrage".
And no, your logic does not make sense. The only reasons as a stockholder that I would agree to a merger or acquisition is because it would make money for myself. Do other parties make money off the deals – yes. Do they take too large of a cut of the profits? O.k. But your logic is arguing that newspapers hire journalist to burn down factories so they can sell stories about fires. I mean this has happened in the past but it is now how newspapers survive day to day.
There is a huge regulatory difference. (At least from the US perspective. I think Europe is roughly in line.)
Pay Pal is currently a "money transfer agent". That has fairly light regulatory requirements, mainly around money laundering.
If Pay Pal began offering financial services – like credit cards, then it would be treated as a real bank. This means a whole new world in terms of regulations. It also means that the Federal Reserve would not only regulate Pay Pal but would also regulate eBay as a bank holding company.
First, it has nothing to do with Alibaba's IPO and everything to do with Apple's new one touch payment.
Second, being opposed to hostile takeover is a bad thing. I will put it simply, if you owned some stock of eBay, why would you want to discourage somebody offering you a price that is higher than it is trading for today? I mean, yes, one could insert poison pills and stuff to damage and tarnish your stock, decreasing it's value so people would stay away, but once again why?
Most of the time it is managers, not the owners, who are opposed to hostile takeover. They face a bum choice. They could work hard to keep the stock price. Or they could slack off, be bought up, and then be fired. Of course they have pay packages in the millions so I don't feel too sorry for them.
I am not sure what you mean by "a properly-regulated insurance industry regulates itself." I am sensing a paradox between "properly-regulated ", which implies external, and "regulates itself", which implies internal. So I am not sure what you are trying to say.
But on to your point. Everything you say is true about property insures and CDS. Both tend to low ball rates to collect today's bonus. Both structure their contacts to minimize moral hazard. Investors in both lose money when the insurance company behaviors irrational.
And both buy and sell insurance on "assets" which the policy holder's don't own in unregulated markets. I will use California earthquake insurance as a specific example. Insurance companies that offer earthquake insurance don't have enough assets to cover all claims in the event of an earthquake. In order to cover their potential losses they buy re-insurance policies or sell catastrophe bonds (a.k.a. cat bonds). The insurance company then turns around and sells re-insurance policies or buys cat bonds in some other area – Tokyo earthquakes, Gulf hurricanes, etc. None of these are tied to a specific asset to needs to be damaged in a California earthquake but are instead tied to a generic event. Since it is tied to a generic event, these polices can be standardized and thus lower costs.
I will point out that before re-insurance and cat bonds, natural disasters would always wipe out an insurance company or three. However, thanks to these unregulated securities which insure items that people don't own, insurance companies no longer go bust. Which suggests that the implantation of CDS (low rates due to a credit bubble pushing down real yields, with everybody searching out for an extra 10 bps) rather than the idea that was flawed.
"Hollowing Out" is a valid concern, but let me make an argument on being "stuck in the middle".
One can either thrive by either being a low cost provided or by differentiation. If you go the low cost route, you squeeze every penny out of production and thus tend to offer generic products. If you go the differentiation route you get to charge premium prices but you also have to offer more expensive custom products. Wal-Mart or Sacks. Companies that try to do both tend to failure miserable at both.
http://en.wikipedia.org/wiki/P...
As an aside, I once worked in an upscale subsidiary in a mass market company. Everybody was miserable. The subsidiary did much better when it was spun out of the parent company.
Which takes us back to IBM. What core skills are they losing? They are still making servers, so not those skill sets. What they are losing are the mass manufacturing / distribution skills, which I count as a modest loss.