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To: pogbull who wrote (31871)	11/28/2002 11:30:31 AM
From: Dale Baker	of 114475

When you look at really smart people who make a ton of money and build successful firms, it's sad to see those who still CRAVE more attention and affirmation that they are really so smart/clever/tough/funny/popular/etc. It's the same on SI with some of the goofier nutcases. The smartest market analyst I have seen the past few years is a Brit who guest hosts on CNBC Europe sometimes, Hugh Hendry. He is soft-spoken, pretty drab looking, still has traces of his Belfast accent and he doesn't sugar coat anything - nor does he yell, scream or hype his particular market calls. He doesn't have to. He just makes a lot of money for his clients, modestly. Gimme class over volume any day.

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To: Dale Baker who wrote (31863)	11/28/2002 12:28:28 PM
From: Paul Senior	of 114475

re: AMZN pair trade. Yes, I agree, it could work. The author of the article spends a lot of time trying to convince us of the obvious, that AMZN is overvalued compared to BKS. The key sentence (for me, anyway) in doing the pair-trade is this though: "The discrepancy in value between these two similar businesses will eventually be removed." EVENTUALLY. For years, AMZN has been written about as a short candidate, yet now the stock is again close to an annual high. It might now be a better short than ever before, but much patience might be required too. BKS at current price looks undervalued to me. I recently started a very small buy. I hope I have the patience to hang on. Had I shorted AMZN it would be much more difficult for me: it's very frustrating for me to short and then see an "obvious" short keep rising in price. ----------------- Fwiw, I infer from the author's discussion that he's comparing bricks/mortar (BKS) to the internet (AMZN) phenomenon. Actually, BKS has a pretty decent and strong internet operation too. Paul Senior All jmo, and I'm wrong many, many times

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To: Paul Senior who wrote (31875)	11/28/2002 12:47:17 PM
From: Dale Baker	of 114475

My reservation about the pair trade is that AMZN is evolving beyond just another Internet bookseller - you can buy electronics, Target housewares and now clothing. AMZN is evolving into a front-door portal that will service many if not most of the largest US retailers eventually. How should AMZN be priced as a service company instead of a stand alone retailer? I have never liked AMZN's valuation - but I think enough funds will pile into AMZN to make it a very tough short. The risk that it could go higher while BKS pokes along seems high enough to make me an observer in this race instead of a player. SKX is my only straight retailer. My AMCR packaging play is looking lame, it may go out flat tomorrow for something else.

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To: Londo who wrote (31879)	11/29/2002 4:33:53 AM
From: Dale Baker	of 114475

Welcome back, Londo. Your post is timely because I had an exchange on the ALGX thread with a long there; prompted me to get out my calculator and play with some numbers from the latest quarterly reports. ALGX bonds trade at 16 cents while TWTC bonds are up to 54 cents. Started to wonder why - then I found the answer in the margins. Here is why I think you are very wrong about the ultimate fate of TWTC shares. (I may take a few profits soon but I plan to hold most of my position through what should be a very rocky ride north of $5 with many dips on the way.) When TWTC brings in revenue, the cost of sales is 43% and SGA is 33%. The remaining 24% is available for the real bugaboos, interest and capex (both ALGX and TWTC spend about $50-60 million per quarter in interest/capex). If the ratios stay the same, TWTC at $1 billion run rate finally breaks even on a real free cash flow basis. At a $1.2 billion run rate, TWTC is making a profit and probably booking .40 FCF per share. ALGX - yikes, their cost of sales is over 50% and the SGA is also over 50%. No matter how much business they do, they lose money BEFORE capex and interest. The only way ALGX survives is to generate much better margins through economies of scale that they have not proven yet. So if TWTC begins to break even or make real profits, a price-sales around .5 is not at all unreasonable. I agree that risk-reward is very different now compared to TWTC at a buck. But if my analysis is correct, TWTC is a still a good long-term investment. And why shouldn't SBC or VZ decide to spend $500 million to buy $1 billion of quality revenues one day? ALGX is a wing and a prayer at best - their banks may apply the thumbscrews next April and force dilution that will make the hope of real profits a lost cause. As long as the bond market backs TWTC I will stick with them. It certainly worked with NXTL (where the bonds trade at 96 up from the low 60's at the bottom).

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