Paradox of the Day

"So you are pro-life AND pro-war? Don't you kill people in war?"

Heard somewhere in a Starbucks.

My Amazing BMW Shopping Experience (Part II: The Random Ranting)

3 years ago I experienced internet car buying for the first time.

After a screaming and yelling match with a dealer that tried to scam us (dealer tried push us lower trim than originally promised, hint: always get a detailed invoice/list on what you are paying for or order). We tried the internet route. We were impressed, the process was simple: we submitted quote request, dealers emailed us with offer, and we could pick the one offering us lowest rate, or ask if the nearest dealer would match the best offer we got.

Not only the internet simplified the process, it also leveled the playing field between dealer and customer. I was surprised when I bought my wife’s car below invoice price. After a little googling I learned that the invoice is not the dealer’s true price. Manufacturers do provide dealers with volume discounts and other incentives like hold back which means dealer may still profit 2% to 10% selling at invoice. We learned that the best way to negotiate is to limit the variables, negotiate only the car price with the dealer, arrange own financing and sell your own old car.

I was predicting that the car retail business model would definitely change dramatically and customer will only benefit. The days of haggling with salespeople who won’t be able to feed his/her babies unless he makes 100% profit is gone. Buying a car will be as easy as buying a Playstation-3 from Amazon.com or eBay. Manufacturers will gain more direct control of dealerships or even switch to the direct selling model. Some precedents: Saturn had success with this model early on, but sputtered lately. I am arguing that it is mostly because of the car, not the selling model. Carmax also had success in the used car segment.

Dealers are feeling the pinch too. With margins squeeze, they all start consolidating into mega groups like Autonation and beef up their internet presence.

Fast forward 3 years. I was so surprised with my recent experience trying to buy a new car I just described. Now most dealers refuse to provide upfront pricing via the internet. Trying to lure customers to the sales floor and then use pressure and some questionable sales tactics.

BMW of Mountain View was part of the Autonation group which has one of the biggest internet presence. The company knows that the information gap between them and customers is narrowing as it says in its annual report:

“the majority of new car buyers nationwide consult the Internet for new car information, which is resulting in better-informed customers and a more efficient sales process.”

Boy I was surprised when BMW of Mountain View lied about their invoice price, which was readily available through the internet. They also tried to deceive me on the financing process, that’s why I chose to obtain my own financing. It is perplexing this dealership is selling a high end vehicle like BMW in the Silicon Valley area with the most informed and educated customer base, yet it is still underestimating customers’ intelligence.

It is also surprising that manufacturers still don’t push the direct selling model harder, or at least try to reign in the dealers. Some manufacturers like Toyota tried this a while ago and failed when the dealers revolted. I wonder why customers never revolted and start demanding to be treated with dignity by the dealer. Despite the fact that many people still prefer getting a root canal than dealing with car dealership, product managers and marketing executives are ignoring the problem.

I was tempted to forward story of my ordeal to the BMW and Autonation Corporate, but I know it will just be ignored. BMW will say that BMW dealers are independently franchised, so my problems are none of their business. However, judging from all the problems other customer have with dealers(just look at sites like Bimmerfest.com, and customerafairs.com), they are cheapening the brand equity of the car, which I have to admit is a great piece of engineering. So it is time for the automakers care about what their “independent dealership” flashing their logos/trademark do. And oh the dealers will keep their CSI scores high because some customers who buy can be easily bribed to give perfect CSI scores with free mat ($130 value). And the disgruntled customers who refused to play the game just vent through their blog. By the way, any BMW corporate/marketing readers here, can I fill out a CSI survey for BMW of Mountain View even though I don't buy?

Well, enough ranting. Bottom line: I am putting BMW and Autonation on my possible short sale list. I believe that BMW’s brand equity will decline unless they can improve the customer experience. And about Autonation, please let me know if anyone is planning a class action or customer boycott!

PS: look at AN's stock chart! :)

My Amazing BMW Shopping Experience (Part I: The Story)

To expand on my previous post. I was shopping for a new BMW. I was expecting that BMW dealers would provide me with first class shopping experience that I expect from the brand image. However, boy, I was wrong. The experience wasn’t even better than my experience buying a used clunker 12 years ago in college. So here’s the story. (The names in the copied emails have been changed) .

So I decided that I want to spoil myself a bit and buy a new fun car. Not that there was my 2000 Acura TL , which by the way still runs like new, it’s just I got that childish urge to get new toy. I drove a friend’s 328i and realized how it earned its reputation as the best sport sedan around, so I decided to get one myself. When I and my wife went to the dealer on a Sunday to browse a dealer lot to see how the different colors and options look like in real life. I and my wife were largely ignored (similar treatment we got when we flew Lufthansa Business Class). Not unexpected since I wore my dinky jeans and wrinkled up Abercrombie T-shirt, also the salespeople probably thought I don’t have a driver’s license yet with my boyish oriental look. It was also a blessing in disguise, as I know that if I am going to buy the car it would be through the internet, the (what I thought to be) hassle free way. We had great experience buying my wife’s car over the internet last time.

I submitted quote requests through all the leading internet sites like yahoo, cars.com, autobytel, autotrader.com, edmunds and Capital One car buying service. I found it weird that I thought I had submitted quote request to all 90 BMW dealers within my radius in the bay area, but I only got 2 offers with quote amount. The rest asked me to call a salesperson, internet manager or whoever, which I thought beats the purpose of my shopping over the internet.

So I got this offer from BMW of Mountain View for to order a 2008 328i from the factory with my desired options (auto transmission and sports package):

Hi Chakra,
If I make it $34,250, would you order the car from me, today?
Sincerely,
Stiffler

It was $2,375 below MSRP and about $300 above invoice (according to cars.com, see below, double click to enlarge), which based on my research seems to be a good deal. So after confirming with my dear rep Stiffler that the price is all inclusive (Except for tax and license), I replied the next day to accept the deal. I decided to ignore the “today” request as I hate exploding offer, as it is usually not a sign of good faith.

So three days passed without any news, so I guessed the offer was really an exploding offer. Well, life goes on…. Then this email came:

Hello Chakra,
My name is Marvin Bobblehead and I am the Internet Manager at BMW of Mountain View. Stiffler is no longer here and asked that I follow up with his customers. Please let me know if and how I may assist you. Thank you and have a great day!
Best regards,
Marvin Bobblehead

So I guess that explained why Mr. Stiffler didn’t get back to me. So I forwarded Stiffler’s offer to Marvin and asked if the deal was still on. So he replied:

Hello Chakra,
Thank you very much for your email! Invoice on your BMW is $34,350 and $400 above that is $34,750. Unfortunately, we do not sell BMWs below invoice. I will honor $400 over invoice and also include free floor mats (Retail $130). If interested please let me know. Thanks again and have a great evening!
Best regards,
Marvin Bobblehead

Oh boy, I decided not to trust these people. As you see above my research showed that the invoice was in high $33k’s (it varies a bit between sites like Cars.com and Edmunds.com). I also have a Wholesale Price List from BMW of North America (I don’t think I can post it here, but search around!), which shows that invoice was $33,860, so in the same ballpark as the one in Cars.com I posted above. I am sure they can come up with excuses why they have special invoice price (e.g. the Euro, Yen, Yuan, light sweet crude price, and their futures/other derivatives and their contango curve, etc). However, my trust-o-meter gauge for this dealership was slowly sinking. I told Marvin “Never mind then.”

Well Marvin was a better salesman than I thought. He tried to salvage the relationship.

Hello Chakra,
Thank you for your email! I am not available in the evenings. However, if you still want to place your order, I will honor Stiffler’s quote of $34,250 as a show of good faith. If you are no longer interested, thank you very much for the opportunity!
Best regards,
Marvin Bobblehead

After deliberating overnight and confirming the offer and terms of the deal ($1,000 deposit to place the factory order and rest at delivery). I decided to recommit. Well the deal was a good one and the dealer was the closest to my place. I was ready to put down the refundable $1,000 deposit to secure my order from BMW.

Marvin told me to come to sign an order form and a credit application. I replied that I am not going to buy with financing from dealer, as I have secured my own financing and even considering paying cash. Marvin replied: “Even if you are paying cash, I still need two lines of information and a signature, so we know how to register the vehicle.”

So I went to the dealership to pick up the paper Marvin wanted me to do. Marvin was out so he left the papers with the receptionist. I was expecting some sort of an invoice or BMW boilerplate order form with the car and options I ordered with price and terms, signed by the dealership and a dotted line for me to sign. But guess what I found:

1) An authorization form “to charge my credit card for the services rendered.” (Nowhere it specifies what services was rendered). And nowhere there was a firm itemized invoice/quote for the car.
2) A credit application, complete with all the necessary fields to steal my ID highlighted (SSN, Driver’s license #, 5 yrs residence). The highlighted field was 6 lines total (vs. the 2 he claimed)

So I called Marvin back demanding an invoice and explanation for the credit application form. I told him it’s standard business practice, especially for capital goods to invoice before the buyer sends payment. Also, if you eat at a 3 star restaurant, would you give your credit card without an itemized bill? He responded “wasn’t my itemized e-mail enough?” Well it would probably be enough if they didn’t try to play games earlier.

I asked why would I sign a credit application when I am not planning to use their financing services. He assured me it’s not a credit application, dealer just want to know if I am “OK.” I told him so why does the form has “CREDIT APPLICATION” header with fine prints in the bottom saying that I:

1) Authorize financial institutions to obtain consumer credit reports on me periodically and to gather employment history as they consider necessary and appropriate
2) Authorize your affiliates to obtain consumer credit reports on me
3) The financial institutions below may be requested to purchase a sales finance contract, to be written, in connection with your purchase. You are notified pursuant to the FCRA, that your application may be submitted to them or to other financial institution

Did he think I was stupid not knowing that this is a legal document? I also told him that I am not authorizing anyone to run my credit check (as it will affect my FICO). If he is scared that I would run away, I can give the dealer a proof of my income (copy of pay stub without SSN or reference from my employer), or I can give them copy of my credit report (again with the SSN and other info blacked out). I was approved for financing by my bank, and I was prepared to give him the approval notice.

Over the phone, he finally agreed to give me invoice with the car description/spec and receipt for my deposit. He also agreed that I didn’t need to fill the “Credit Application” if I pay by cashier’s check or let my payment check clear before taking delivery. I told him I agreed to that. I promised Marvin that I would come the next day to finalize the deal.

However in the evening my wife brought me to back to reason. She knew that I was drooling for the car, but is it worth playing games with these people? We agree that dealers deserve to profit, but we’d rather grant our business to another party with integrity rather than a bait and switch operations.

The next day I emailed Marvin to thank him and inform him that I was backing off the deal.

I think I am not buying another car until my current car is dead, probably in another decade at least.

I just couldn’t believe that apparently the process of buying a BMW is not much different from buying a cow in rural Uyghur, China.




UPDATE (11/11/07):
OK I found out several items that put some of the numbers in context:
1) Invoice numbers discrepancy can also come from Advertising fee (DAG/MACO/whatever). This amounts to about $400 and $500. OK well I think this should not be charged to customers, but seems to be SOP anyway. But why wasn't the dealer straightforward and itemize invoice.

2) checking your credit with SSN and DL# seems to be Standard SOP these days, at least in CA even though you're not applying for credit. Some says this is due to Patriots act... I am OK if you want to check my background, but make sure the form states what my personal info will be used for.
Few years ago some dufus apartment manager tried to steal my ID and apply for credit card on my name, based on an appartment rental application. Thank God I Monitor my credit report regularly.

I Hate the car Buying Process

I am in the process of buying a car from a luxury brand. I was expecting for a painless experience, thinking that the sellers would pamper me. Boy I am wrong. I got better treatments from street vendors in a pasar malam.

I wonder if Amazon.com would start selling car soon.

Bay Area Drivers

I am wondering... It seems to me that San Francisco bay area drivers are driving 35 miles per hour in the highway with their nice powerful cars with more than 200 horsepower (Bimmers, Audis, Acuras, Lexus). Isn't that a waste of money to buy those fine pieces of engineering to perform what a scooter can do easily?

Whole Foods CEO, Pumping Stock on Message Board

Well as you know I am not a big fan of stock message boards. However, I can't stay away from it either. Sometimes when a stock is moving sharply upwards inexplicably on no news, I would go to the message boards and check out the buzz and rumors.

However, I never thought that I could get insider information from these message board. I just found out from this fresh Wall Street Journal article that Whole Food's CEO, John Mackey has been posting in Yahoo! WFMI message board under the name rahodeb. As rahodeb, Mackey made posts that were positive on WFMI and sometimes blasting its competitors, including Wild Oats, that Whole Foods is in the process of acquiring (if the FTC lets them).

I wonder how many other CEO's or other C-whatever-O or VP's are actually pumping their own stocks in disguise in message boards. It can probably helpful to know these posters. However, I am more interested in what the followup from this case would be. I wonder if corp executives would be required to report their online identities to the SEC soon.

Glaxo's Avandia Drama

Yesterday I wrote about how the fallout from a recent study that found Glaxo' Avandia has potential to increase heart attack and death. Yesterday i came out this nice coverage of the Avandia drama at BioHealth Investor, on how the media overdramatized the case. I think this has a potential for the Vioxx/Cox2 case redux. That dramatically changed the modd and behavior of the FDA. FDA's approval rate dramatically declined after that, mostly because of public outcry blaming the regulatory body for approving the drug and well, public's sad mastery of statistics. I am for public disclosure of all information but not mis-information.

Even the author of the Avandia study, Dr. Nissen cautiouned the public, “I do not want our study to lead to a public panic... Patients should not stop taking the drug on the basis of a news report.” in a CBS coverage.

The study found that 0.44% of the 10 thousand people from various Avandia clinical trials developed heart attacks compared to 0 .33% taking placebo, and death resulting from cardiovascular causes was 0.38% in Avandia group compared to 0.19% for the placebo group. After crunching the numbers, the authors came up with the odds ratios that taking Avandia has 1.43 times the odds of developing heart attack and 1.64 of dying (the confidence interval was a little broad). So as you can see the odds of dying and getting heart attack despite being significantly elevated, was still relatively small. All drugs have side effects and elevates risk of developing something. Some of these risks might show up during trials, some won't until the drug is widely used. Hell, I don't have hard data, but I guess French Fries might have similar effect to Avandia.

A lot of people are panicking, a family member asked if it's true that taking Avandia will give him 43% chance of developing heart attack and death. This is serious matter, and I think Avandia patients should discuss with their doctors if taking the drug is still worth the drug's increased risk. But there is no need to panic and stop taking the drug for no reason. I think instead of spreading uncontrolled wildfire, the media might be better off giving the public (and probably capitol hill) statistic 101 refresher before oversimplifying and misinterpreting the facts.

The sad part is that I think this will make the FDA less efficient in performing its duties. No FDA official will want to face congressional hearings or public outcry for his/her head in the future ifor a drug being approved today ended up having have unknown side effects/risk. The Vioxx case have made the FDA slower and being overly conservative in approving drugs. I won't be surprised if in the future the FDA won't approve any new drugs at all because of this fear.

I think the FDA is only a front line gate for drugs. Ultimately it is the patients and physicians' (well and payors, etc.) decision whether a drug's benefit outweighs its risk to be prescribed in case by case basis. I think it is better off that patients and doctors are given the chance to use as much choice of arsenal in fighting diseases and improve quality of life.

Grrh part 2.

Well, My portfolio is rather heavy in biotechnology and Chinese stocks. So as you can imagine the past few days were pretty bad.

Now I am betting that the FDA will be scared to approve any drug that has even the slightest safety problem after the recent Glaxo Avandia bruhaha. Thing has been tough after the Vioxx case, that resulting the FDA approving less drug. Now, I bet the FDA will be scared to approve any drug application, even when the potential benefit may greatly outweigh the risk, unless it has squeaky clean profile. No one wants to be in congressional/senate hearing years from now if a drug approved today ended up having higher risk profile than initially thought.

I was enjoying some nice run with my little portfolio of Asian and Chinese stocks and ETF's. But then my old friend, Alan Greenspan, just had to take the punch bowl away, warning the market that a correction in Chinese market is imminent.

OK maybe now I should start buying gold bullions instead.

Grrrh

I am mad.

I am reading some market updates when i found this article at Marketwatch, it says "India's PT Telekomunikasi Indonesia (TLK : Perusahaan Perseroan (Persero) P.T. Telekom. Ind., 44.88, +0.88, +2.0% ) picked up 2%."

Well, P.T. Telekomunikasi Indonesia, as its name suggests is an Indonesian company, not Indian. Indonesia is about 3000 miles away from India. I just can't believe a Marketwatch reporter missing basic fact.

Well, maybe I am just angry because people are having a lot misconception about Indonesia. I think most people in the West thinks that the country's all jungle and all schools in Indonesia are Madrassas (but what's wrong with madrassas anyway? Yes, some has been misused by some interest group of the violent kind). Or that the whole country was swept by tsunami and all babies are up for adoption by Britney. I seriously think that an orphanage might be better place to grow up in than the Spears household).

OK enough of this random pointless rant.

Champions League Final

Ok getting ready to watch the Champions League final between AC Milan and Liverpool. This is bigger for me than Super bowl or NBA finals for me. I enjoyed 2005 final between featuring the same match-up when down 0-3 Liverpool came back to tie the game in regulation and won it in the shootout after scoreless extra time.

I don't know whom to side. I think Milan plays better football and I like their Brazilian infused Joga-Bonito style better with their 6 Brazilian players. However, I think it's wrong for them to win it all after match fixing the scandal.

Well, I guess I'll just enjoy the football who knows there is gonna be another Peter Crouch unforgettable moment. Like the scissors kick vs. Galatasaray earlier in the tournament (I wonder how the heck he didn't break anything).



Update: a bit disappointed to see Crouch missing from the starting lineup, especially after all he has done to get his team here... but oh well... I hope he gets some minutes.

An Ode to Open Source

OK after I finished setting up my new Vista laptop and got everything going (well almost), my fiancee told me to do something about a 6 yr old desktop collecting dust in a corner. Besides that desktop, we have 4 laptops. So while the old Dell desktop still can be useful for basic stuff, it was too slow and less productive compared to the newer PC's in the house. We wanted to donate it to a school or other non profits at first but lazy me kept procrastinating.

All our PC's in the apartment share one printer and scanner, the old fashioned way, by plugging and replugging cables. I tried turning on Windows' File and Printer Sharing, but then decided that it was too sluggish for the old desktop. I was preparing the PC to be donated to a local charity, when I then decided that I want to check out Linux and that old PC would be the perfect sandbox machine for me. So I downloaded and installed Ubuntu 7.04 (Feisty Fawn) on the machine.

Well, I was very surprised that the installation was pretty painless, considering my recent bout with Vista. Ubuntu recognized almost all of my hardware devices during installation and I was up and running within an hour or so. I was surprised that the old clunker now feels faster than even my newer PCs running windows. Applications launch and close in a blink and booting up takes only less than a minute. I set up file and print sharing using Samba, and it actually worked pretty seamlessly with my Ubuntu/Linux, XP and Vista mixed environment and felt much faster than Windows file and print sharing. I even went out and upgraded the hard drive, and make it a backup file server for our laptops.

I also got a chance to play around with OpenOffice and was quite pleased to learn that it is pretty compatible with MS Office documents and at a glance, I would think that for most users OpenOffice can be a good alternative for MS Office without the $400 price tag. I can pretty much do almost all the daily task I normally do in Windows with Ubuntu (at much lower cost). Well yeah, I wish that I can play games like World of Warcraft on it (actually some people managed to do it with some emulators, I tried wine but decided it might not worth the effort considering I have other Windows PC's at home).

The bottom line is I am blown away by the fact that all these quality softwares are available for free, built by an army of volunteer developers working gratis, collaborating from all corners of the world. I think sooner or later, Microsoft and others might have to rethink their business and revenue model. Linux has gained good acceptance in the enterprise and development world, but it was mostly in the back end, running database and web servers. But now I can see that some savvy mainstream consumer and business users may use Linux like Ubuntu in the front end too, running daily task like web browsing, email, word processing, spreadsheet, etc. using free open source applications llike Firefox, OpenOffice, etc. Actually Dell is planning to start shipping PC's preloaded with Ubuntu. I will be closely watching this development.

We have seen how the internet and especially open source community developed products disrupted many traditional business models. For example, Wikipedia has managed to challenge Britannica's domination in the encyclopedia world. Web 2.0 innovations that among others include blogs and blog aggregators like Seeking Alpha and wiki based community like ValueWiki are starting to challenge the business model of traditional Sell-Side Wall Street Research.

Well, I guess the world is getting flat after all.

Wrestling with Vista and my New Laptop

Finally my new laptop finally arrived. I was like a kid, quickly opening the box and plastic wrappers. But the joy didn't last too long. My new laptop comes with this little thing called Windows Vista.

For the most part, Vista is a looks cool, but I still need to get used to the new interface. I ended up uninstalling many of the preloaded software, most of them useless but launches automatically at startup, and turning off most of Vista's nifty cosmetic features just because it took me too long to do anything (mostly boot, reboot and launch applications). I am trying to figure out if there's a way to turn off or at least reduce the security messages asking me permission to launch, install or have access to anything.

For the most part, the migration from my old computer has been pretty decent. I managed to reinstall most software I had in my old computer, well it would be nicer if I could reboot less between installations. Yes, my IM buddies, that's why I logged in and out every 2 minutes or so. I was happy that it took me only a few seconds to get my old outlook 2003 data file to work with Outlook 2006. Some software, like Adobe Acrobat 7 kept telling me that I need administrator rights to install it, I thought I was the master of the universe.

It is more challenging to get my hardware to work properly with Vista (e.g. printers and scanner). I guess the trick is just to install the driver without its accompanying software (like HP's officejet utility/manager).

Anyway I expect to fight little fires here and there with my new computer for now. Maybe I should have listened to Chris Pirillo and get XP with my new laptop. Here's Chris Pirillo ranting about his Vista experience... I can't think of anything else to add. Well, I didn't exactly have a great experience with Vista so far, but my nightmare's not as bad as Chris described.

Scratch and Win

Well I just got aware of a new service aiming to help website owners attract traffic and have advertisers sponsor prizes. If you're intrested, here's the full article at TechCrunch.

So I have decided to give it a try, and please scratch the card below. You can win prizes, (and if you win something I get the same prize too). Right now the site is only giving away like $90 per day, it hopes to raise the prize value as it gets more awareness and sponsor (or "uncle VC" funding?).

I Finally Found Wii, But...

Target won't sell it to me!

OK so you know that I have been looking for my Wii for more than 5 months now. A few days ago I stumbled this website that taught me how to check Target's inventory through their price scanner (the code is 207-25-0001).

OK so today I dropped by my local target to restock my cleaning supply, fridge and food cabinet. While there, I dropped by the electronic section and found no Wii in the shelves. Then I stopped by a price scanner and checked for a Wii. And alas, the thing said that the store's stockroom has Wiis so I approached the redshirt lady behind the electronic counter and ask if the store has Wii in stock. She quickly said "NO" and then I told her what I saw in the scanner. She finally relented and grabbed her handy talkie and called the stockroom. She said the store has Wii in the back but they couldn't sell it to me until Sunday. I asked "why?" She said it was simply store policy. She told me to go back on Sunday and line up in the morning and get a ticket or something. I reasoned to her that it was in both my and Target's best interest to sell me a Wii at the time. First of all it would improve the store's financial by reducing their working capital /inventory. She would also free up some precious shelf/storage space (maybe to keep excess PS3 inventories). Target's ratios will surely look better to those Wall Street analyst. Also I tried to teach her about time value of money that $1 at the time is better than $1 on Sunday. Well apparently my geeky arguments didn't work and I left the store without a Wii.

In my mind I said to myself that this is BS. Why would Target make their inventory public if they won't sell it to me. maybe they should simply close their inventory system closed to the public and internet sites like itrackr.

Oh on the topic of BS, yesterday I stumbled upon this interesting article about paid stock basher on Yahoo! finance message boards somewhere. Thanks to Jon at ValueWiki, I learned out that it's a hoax that's been around since 2000. Wow, I probably should stop paying attention to those boards now, it's pretty scary how much convincing hoax is out there.

No Twitter for Me....

Dear friends, families, and anyone else who cares,

Some of you has suggested that I provide regular updates on my life through Twitter. After a thorough examination of my conscience, I have decided that Twitter is just not for me. Well, for those who doesn't know, Twitter is "a global community of friends and strangers answering one simple question: What are you doing? Answer on your phone, IM, or right here on the web!" So if you are asking what I am doing, for people who know me, my likely answer to you would be "Not your business, but thanks for asking."

Well, while I am on this topic, yes you guess it... I have no plans to set up kris.tv. But for those of you that needs to nose around someone else's life, may I suggest you check out justin.tv?

Why I Don't Want to Fly Airbus 380

The Airbus 380 is on its US marketing tour these days. I was actually highly impressed with the plane. The geek side of me thinks that A-380 is quite a magnificent engineering feat. Despite the problems Airbus is facing, such as production delays, I think the plane will transform the future of air travel. It's good for the environment and make travel cheaper (assuming airlines can fill all the seats), as the plane has the best fuel economy per seat/mile.

Well, a couple days ago I read an article in WSJ, that partly described problems with Los Angeles Int'l airport. The airport, especially the Tom Bradley International terminal is operating beyond its capacity. I used to fly internationally a lot to and from LAX, and for some reason my flight often arrived early (maybe because I don't fly United, American and the likes). So my typical LAX International terminal experience was something like the following:

We landed 1-2 hours earlier than scheduled. Then the captain said "Thank you for flying Singapore Airlines... Uhh thanks to favorable wind we're early, which is good news, however we don't have our gate yet. So we have to sit in the tarmac until that Korean Airlines 747 leaves the gate. Please remain on your seat and refrain from leaving your seat due to security regulation." OK 3 hours later (1 hour behind scheduled arival time) the captain is back on the PA system: "Sorry, the plane hogging our gate is delayed because a passenger didn't show up and it took them some time to find and unload his baggage." I guess finding parking for an airplane in LA is as difficult as finding parking spot for my car. OK back to the story, it takes me on average 2 hours to clear immigration and pick up my bag. I usually fly 777 or Airbus 340, so you can imagine the time from aircraft gate to the curb rises exponentially when I fly a 747 or there were multiple planes arriving at the same time.

So I can imagine once those Airbus 380's start flying, I will have to race with a horde of 500-800 other people to clear immigration, not to mention that there's more bags for the ground handler to process. Oh did I mention that LAX will only have 2 gates that can handle A 380? Thank God i am not in LA anymore and I have to admit that SFO's international terminal is marginally better. But still, I don't think US airports are prepared to process the volume of passenger that Airbus 380 will bring. Especially with the ever changing security process and regulations. I can imagine that I will need to show up in airport 4 hours before departure and probably 5-6 hours to clear customs and immigration upon arrival.

Hopefully there's a stealth phase startup out there developing teleportation transporter a-la Star Trek's Enterprise.

PC vs. Mac

OK I was just recently in the market for new computer. I have a three year old ThinkPad that's in the tail end of its three year warranty, and it has gone trough 2 trips to IBM/Lenovo depot to replace its planar/motherboard. So I know that the next time this baby needs repair, I would spend some serious $$$. Not to mention that I am running out of Hard drive space and in need of new battery as currently the battery only last 15 minutes.

So I was sooo tempted to switch to a mac after seeing all those mac vs. PC ads. And I have to admit that the mac looks cooler, and more productive and easier to use out of the box. I was worried that I would have problem with non-compatibilities with the rest of the world (read Windows world). Well, as a geek, I am currently using Firefox as my primary browser. However, more often than not, I am forced to admit defeat and fire up my MS Internet Explorer to view some of those "designed to work only in IE" website.

Well, Macs now can run windows too with its boot camp. However, after hours of research, I don't know how well it works with Vista, the future of Windows world. And switching back and forth between Mac OS to Windows in a "bootcamped" mac is not as easy as pressing alt-tab as I need to reboot.

In the end I gave up the idea and few minutes ago just finished placing an order for a brand new ThinkPad T60. Maybe if I have some more pocket money I would buy one of those cute mac minis.

Kiva

For the past few months or so, I have been involved as a volunteer translator with Kiva, a San Francisco based company that provides a platform for people to make micro-loans to small business owners in developing country.

I first got aware of Kiva when watching PBS' coverage on the company and its borrowers and partners in Uganda. Actually in the past year Kiva has been gathering a lot of press coverage. Most recently, Nicolas Kristof from NY Times did a very nice op-ed , (and watch the video!), with a very descriptive title "You, Too, Can Be a Banker to the Poor."

I think Mr. Kristof's coverage nicely summarizes why I support Kiva. Growing up in indonesia, I learned that pure charity doesn't really work in most cases, as it often encouraged dependence and irresponsible spending. However, most of the businesses that Kiva targets are mostly ignored by banks. Well, in most developing countries, where securities markets are not so liquid, the traditional commercial bank is the main source of capital, so it can be choosy. If you one is not operating a cell phone network, oil refineries, power plant, millions of hectares of soy or oil palm, etc. the banks will probably not look at its loan proposal. The other alternatives that these small business owners use to have was individual loan broker that charges ridiculous interest and term. In Indonesia these people used to be nicknamed lintah darat or "land leech." This article (in indonesian) describes how a lintah darat uses thugs to collect loan and charges 20% interest for one month loan (that's like 240% a.p.r.). For you finance geeks, the one month Indonesian rupiah government bond annual yield ranges from 9-12% in the past 12 month, and consumer lending rates charged by banks were in the 16-20% range. So the lintah darats charges like 200% premium spread. However given that most of the micro-business owners are uneducated, they are unlikely to be able to even read and fill out a bank or government loan form.

With Kiva, individuals with Paypal account can lend these micro-business owners. Kiva lenders does not charge interest, however the local partners may charge interest to cover its operational expenses. Like banks, Kiva also makes the business owners accountable for the loan they receive. Over the course of the loan, the entrepreneurs are required to regularly update Kiva and their lenders with updates on their business through a journal. As you can see it's not as sophisticated as 10-Q's or 10-K filings, but at least it teaches accountability.

I was skeptical about the model at first. Considering that by western standards, the credit quality of these borrowers would be even beyond sub-prime by developed country standard, I expected very high default rate. So the first time I lent, I thought of it as charity. However, I was pleasantly surprised when I learned later that after over 30,000 lenders have contributed more than $2.5 million in loans, the default rate has been almost zero. Well, about 4% of the loans are behind schedule, but I still find the numbers really impressive.

I found that reading the journal can be touching at times. It is so satisfying that the $50 I lent to a small business owner 10,000 miles away is helping someone lift his or her living standard, and it cost me nothing (well the lost opportunity cost of earning interest which is insignificant).

So what are you waiting for? Start logging in to Kiva and instantly become a banker to the poor.

Wall Street Journal Taught Me How to Make Perfectly Cooked Steak

I came across a recipe on how to make a Perfectly Cooked Steak in Wall Street Journal. The recipe was prepared by chef Laurent Tourondel of BLT (Bistro Laurent Tourondel) restaurant in New York. I printed it out and put it in my kitchen folder for a while. This weekend I tried making the whole course set (steak, creamed spinach and mushroom) and I have to say I am satisfied with the result. The mushroom recipe was surprisingly good, now I know why those porcinis are nicknamed hen of the woods, it tasted like young chicken or hen.

I had 2004 Big House Red that I bought for $7.99 from Whole Foods with the meal. It was pretty good match, not to mention that the wine was good value.

So pleasantly surprised how WSJ could teach me how to make perfect steak too, besides the perfect portfolio. :)

The WSJ version requires subscription. Here's a link to a free version from Charlotte observer.

Note: I had about 1 inch steak and cooked it in the oven for 10 minutes after searing (Recipe said 14 minutes for 1 1/2 inch steak for rare/medium rare). I was aiming for medium rare, but it ended up medium well so I would constantly monitor the steak to check for doneness. But the recipe (or Chef Tourondel should I say) discourages from sticking a thermometer because it will let the juices run out.

Merrill Lynch Attempts to Limit Access to Its Research

Today, Merrill Lynch announced that it was "taking aggressive steps to curb distribution of its research, including restricting and delaying media access and establishing licensing agreements." For more complete coverage, here is a link to a version of the news from Reuters. The company said that its research was being "napsterized."

I am interested to see how successful Merrill will be in this endeavor. This sounds to me like a desperate measure to restore profit from research, which has been eroded badly after the dot com bust. A while ago, Steve Jobs said that in music DRM hasn't really worked and probably will never work. I doubt that Merrill will be able to curb distribution of its research, unless it manages to lock its clients in a room without access to the outside world, telephone and internet. It is 1000 times easier to share information contained in a Merrill report (opinions, upgrade/downgrade, target price) than breaking DRM and making bootleg copies of MP3's.

I mentioned a while ago in this blog, investment research was in the process of getting commoditized anyway, partly as result of new regulations like regulation FD that came after the scandals involving many star analyst during last dot com boom and bust. Sell side analysts are currently barred from having privileged access to executives and information. So there is no information that is available to Merrill analysts that is not available to other analysts and the general public. So the only "value added" part of a Merrill report is pretty much the analysts' opinion and interpretation of data. Well, I concede that sell side analysts tend to be smarter and have deeper industry insight and experience than the average Joe. Apparently analysts' opinions still carry some weight, evidenced by how their rating upgrades/downgrades can still influence stock price movements. But I wonder how much the market values sell side researchers after all the scandals few years ago. And Merrill is not the only research house around. It will be interesting if other research houses will follow Merrill's move. There are a lot of insightful opinions from smart people that are available for free in the internet. For example, you can get Henry Blodget's view on the market for free from his blog. (BTW Blodget was a former Merrill analysts back in the day).

In my opinion it may be more productive for Merrill and other sell-side research houses to figure out new business model for their research rather than trying to fight the inevitable democratization of market information.

Everything Filipino in Bay Area

If you live in Bay Area, or plan to visit, and like everything Filipino (or is it Pilipino?), you gotta visit this cool list in Yelp. This is the best guide to anything Filipino in the SF Bay Area so far.

Thanks Eugene!

BAYAN KOOOOOO!!!!

PageRank

Some interesting PageRank result (according to my Google toolbar):

Google: 8/10
Yahoo!: 9/10

Yes, Yahoo! has higher PageRank than Google. At least this increased my confidence a bit that Google is not manipulating its own PageRank.

If you want to know which sites has a PageRank of 10, visit this link at www.seocompany.ca.

Addendum: OK, I am talking about the main portal page here http://www.google.com and http://www.yahoo.com. Yes, each individual pages in the domain have its own PageRank. And PageRank is not a measure of traffic, but how mostly by counting how many page links to it, more like like in "citation count" in scientific journal publishing world. Thanks for all the friendly emails from my Google and Yahoo! friends.

What Do You Think About Pfizer?

Wow, it seems that people don't have much respect for Pfizer, the giant drug company that dedicates itself to humanity's quest for longer, healthier, happier lives through innovation in pharmaceutical, consumer, and animal health products. I was browsing through the Biofind Rumor Mill, a message board where pharmaceutical and biotechnology industry insiders share "insightful information" about the industry and players.

This thread titled "5 words that come to mind when u hear Pfizer" attracted my attention today. And at the time of writing, I can only find five neutral/positive posts in there. two of which were at the beginning of the thread:

* Caring, happy, children, smiling, women.
* ha, ha, ha, ha, ha

Well, it went downhill from there. Most of the positive toned comments I found were mostly about the company's leading Erectile Dysfunction pill:

* PILLS THAT GIVE GREAT ERECTIONS!
* My Grandfather Has Sex Now!

And another one is not really an opinion, but hinted at Pfizer's possible M&A strategy.

* Looking to buy Abbott Labs

Some of the classic ones:

* I've no intention of staying
* change, turmoil, lack of productivity, downhill, demise
* You paid Hank how much?

There are some other good ones in the thread, but I decided not to post them here. I am trying to keep this site at least PG-13 rated.

Well, I suspect that the people who posted in the thread are probably mostly disgruntled Pfizer (former) employees. And like everything else, people who are happy about something tend to be quieter. But I think this thread suggested that Pfizer's PR has some work to do.

Disclaimer: I and my relatives don't own Pfizer stocks, but I own some Abbott stocks.

Funny HomeWork Answers

OK, while researching for my last post, I found these funny homework answers at EclectEcon. I wish I was that creative when I was in school.

Financial Contagion Party

Last night I went to a party. After a few hours pigging out and drinking wine and limoncello, someone started a discussion about the recent stock market downfall, asking why Chinese selloff triggered selloffs elsewhere in the world (e.g. US and Europe). Well, if all those pension funds, mutual funds, hedge funds and other savvy investors got out of Chinese stocks, shouldn't it increase demand for financial assets elsewhere? So why did US and European equity market went down also, instead of going up? well I had hard time answering the question myself. I remembered vaguely from my very limited reading that even economists had come up with hundreds of explanations, but no consensus yet. The best answer I could offer was the usual herding behaviour theory and the empirical fact popular after the 97 Asian crisis that markets are quite highly correlated, and therefore prone to financial contagion.

OK i got home and geeked out. So I searched "financial contagion" at Wikipedia and I found that Wikipedia article on financial contagion is well, still disorganized and a little too esoteric for most people. But I think this is the main point: "Despite of substantial progress in research, there is still no consensus on definition of contagion. Generally it may be defined as an excessive unanticipated increase in cross-market linkages after a shock to an individual country (or group of countries). ... Researchers argue that interdependence can be measured and anticipated. However, an existence of extreme, asymmetric patterns of excess volatility that can not be explained by fundamental links between economies has led experts to suggest that contagion - rational or irrational - can be the only remaining explanation." Which means that "Financial contagion" is the interdependence between financial market that experts cannot explain.

Then I found this nice page on financial contagion in World Bank's website. I am pleasantly surprised that this one was a little easier to read, but still concluded "So, What Is the Ultimate Cause of Contagion? This is a very hard question to answer. As you can find in this web site, different papers point toward different directions. "

OK if an army of smart people with average IQ of 180 or higher can't explain this, how can I explain? Here's my answer... Thanks to EclectEcon.

To Kill a Brand (PS3)

A video about how Sony killed the PS3 brand. Better than many analyst reports out there.

Video credit: "How to Kill a Brand" by Doc Adams.

Where's my Wii?

OK initially I wanted PS3 for Christmas. But during our Christmas shopping, my fiancee spotted a Wii demo and she got hooked. So we scratched out PS3 and decided to get Wii instead. Ok after trying (not so) hard we didn't get any Wii under our Christmas tree. I didn't manage to get Wii for my recent birthday either. It's simply flying out of the shelves faster than I can say Wee. However, to my surprise I have been able to spot a stack of PS3's at my local BestBuy and Target. It's been tempting to grab one but $700 is a steep price to pay, and we don't even have an HDTV yet. So for now we decided to continue watching patiently for any Wii's to show up in our friendly neighborhood retailers' shelves.

it's impressive, that Nintendo with Wii has been able to overtake Sony's dominance in thie new gen console war. Look at this sales chart, courtesy of vgcharts.com. Yes Sonny was behind, because it had production problem, even now I think Nintendo has more production capacity for Wii than Sony does for PS3, but I can't find my Wii and find a small stack of PS3 inventories. Does this mean that Sony's in trouble?

I still plan to get a PS3 sooner or later. I got hooked to the Metal Gear and Final Fantasy series, but maybe I can live with Mario and Zelda instead. Or maybe if PS3 truly tanks, Konami and Squenix decides to move the Metal Gear and Final Fantasy to Wii instead. hummm. OK I'll start saving again to make up of the money I lost in the last few days in the stock market bloodbath.

ValueWiki

Since about October or so I have been contributing to an open source investment research site named ValueWiki. ValueWiki(VW) is trying to implement the "Wikipedia" model to the world of Investment Research. When I joined in October, the site was still in early beta, besides the founders, Jon and Zach, there were barely anyone contributing to the site. However, I got intrigued by their proposition and decided to join and help them grow the site by contributing and spreading the word.

The site has been growing steadily, recently it had its first 1 million pageviews. And it has been gaining traction significantly since the founders started marketing more aggressively January. Just check the Alexa data here. The site has been getting some Buzz in the blogosphere.

While the community is still at its infancy, I believe that an open source investment research platform like ValueWiki can have a dramatic impact on how investors share information and collaborate on research.

There are many reasons I believe in this model. First of all, until recently, sell-side and independent researchers affiliated with the big investment bank and brokerage houses has the biggest influence in disseminating information and form market opinion on stocks. While most of these are subscription based, the advent of internet and message boards have made their analysis and opinion widespread quickly. However, In my opinion, recent development have reduced the influence of these analysts. The bubble burst of early 2000's and fallout of all those conflict of interest cases certainly dented analysts' credibility. Star analysts like Blodgett, Meeker and Grubman fell from grace. Regulations that prevent analysts to get a share of investment banking pot have reduced the motivation of the sell side community. Many of the best analysts are moving to the buy side. Furthermore, regulations FD that was enacted after the bust, limited access of these analysts to "privileged early information" from management. Which means that these analyst has the same information access as other people (like me).

I think there would still be market for paid analysts research. Considering that the analyst community are made up of some of the smartest people around and experienced industry experts. So there would still be good market for their opinions.

On the other hand, I am impressed on how wikipedia with an army of volunteer editors has been able to build an encyclopedia that matches the quality of Britannica, an encyclopedia written by staffs that are experts in their fields. Well, there are debates whether wikipedia is as accurate as Britannica, but wikipedia is certainly more comprehensive. Jon and Zach mentioned in the ValueWiki about page that "Encyclopedia Britannica's paid staff could only write 118,000 articles in 240 years. Wikipedia has written 1.6 million articles in 5 years! So Wiki seems to create a good model for collaborative research." I think ValueWiki can do the same to the world of investment research as wikipedia to encyclopedia. I think the average sell-side analyst can only cover 5-15 stocks (less for complex large cap and more for small cap analysts).

Paid analysts have the incentive to cover more well known stocks that bring some trading business to their brokerage houses. I can imagine that once ValueWiki gets bigger, like wikipedia, it will have broader scope of coverage than the professional publishing analyst coverage universe. ValueWiki could certainly carry more information about small cap stocks and emerging market stocks that don't get much paid analyst coverage, increasing market efficiency and transparencies for those securities.

Well, right now we're starting to see trends that a lot of information are floating around blogs and investment message boards. However, these channels are ripe with problems. There are many popular finance blogs that have gained credibility from public and became quite influential. Here's a list of top 100 blogs ranked by alexa data compiled by Jon. However, information contained in these blogs are quite scattered. While there are some blog aggregators like seekingalpha that help organize these info, it is not purely democratic. SeekingAlpha has a gatekeeper that selectively chooses which blog to be included or not, therefore many worthy entries are not included.

Another place where people collaborate on an investment research is the message boards universe where anyone can say anything, but it is full of irrelevant and inaccurate information that goes unchecked. Consider this kind of interaction I notice at a biotech stock board:

Mr. Fool: This company's drug is in phase 3, but the stock is tanking, I am buying
Dr. X: I am a doctor, I think FDA won't approve the drug, Don't buy the stock
Mr. Fool: Are you really a doctor? you're so stupid, how come you don't know the drug is so hot!!!
Profanity laced interaction continues for the next 1000 posts

In my opinion the community moderated model that ValueWiki and Wikipedia uses can alleviate some of the problem of inaccuracy and incivility in the message boards.

Well, ValueWiki needs to reach a critical mass to work best and deliver all these promised benefits. There have been other investment wikis before like stockepedia and wikistock, however neither of those ever gained as much traction as ValueWiki. I think the founders, Jon and Zach's commitment to the site is the difference maker. I really hope that the site becomes really big and influential like Wikipedia. I can imagine that one day, posts in ValueWiki could trigger an SEC investigation that uncover Enron type schemes or option backdating scandal.

Sudarshan Chakra

OK, some people asked me some questions regarding this blog.

Q: What is Sudarshan Chakra?
A: Ummm I don't think I can explain it better than wikipedia can. Note: it's spelled differently there... well, that's why I never won Spelling bee.
Q: Why picked the name?
A: I dunno... it randomly came up to mind, maybe because of beer, wine, or something harder. I forgot... it happened last year.

Telkom vs Indosat

I was kind of surprised recently when I saw the stock performance chart of Indonesian communication companies PT Telkom (NYSE:TLK) and PT Indosat (NYSE:IIT). As you can see in the chart below, in the past 2 years Telkom has been outperforming Indosat.

Growing up in Indonesia, I didn't have good image of the PT Telkom. It used to have monopoly over Indonesian fixed line telecommunication system. Like other government monopolies, it was fat, slow and bureaucratic. Until now, Indonesia had a pretty sad (plain old style) telephone penetration of only 7%. I t's not that people didn't want/need telephone or could not afford it, but it used to take months or years to get a telephone line from PT Telkom, even in big cities like Jakarta.

Indosat, on the other hand was a little more competitive animal. It was established as a foreign investment company as Indonesia's first satellite operator. It had to compete with foreign satellite operators and global telecommunication giants operating in the region for some of its services, such as international telecommunications services, including international direct dialing telephony, international data network communications, international leased lines and international television transmission services.

Indosat was Indonesia's first major cellular phone service provider, and for a while it had virtual monopoly in this segment before government started deregulating the telecommunications sector earlier this decade. In a few years, Indosat managed to sell more cell phones than Telkom's fixed line telephone installed base. It still takes a few days or weeks to get a conventional telephone service installed by PT Telkom, while it takes only a few minutes to get a cell phone. All one needs to do to get a cell phone is walk into a store, fill a form online, pay and he or she can walk away with a fully functioning phone a few minutes later. So now according to Telkom's presentation, Indonesia's cell phone penetration rate is about 20%, and there are about 3 cell phone for every 1 fixed line.

So after the government deregulated and split Telkom and Indosat completely in 2001 and let them freely whack each other at any segments, I thought Indosat would kill PT Telkom. Nobody would want to use plain old telephone anymore and everyone would snap up Indosat Cell phones like crazy. Well, Telkom was behind in the cell-phone game and their bureaucratic culture would make them move slow. well, I was dead wrong.

When they first introduced cell phones, Indosat focused on the money drenched big cities in Java and Bali, and focused on post-paid subscription based service. Well, this strategy worked pretty well in the beginning.

Telkom's cellular service, telkomsel was created to provide an illusion of competition to Indosat's service. In 2001, Indosat divested all its ownership in Telkomsel and Singapore's Singtel obtained 35% of Telkomsel and became Telkom's new mate in the cellular game.

However, in the past few years, Telkomsel has been aggressively pursuing growth throughout Indonesia, focusing on markets outside of Java and Bali. Telkomsel was the first cellular company to have coverage in all of the country's provinces. the company claimed to have reached 90% of the country's 280 million people. Telkom was utilizing their infrastructure, like using their underwater fiber optic cable to transmit data and signal between islands and using their existing switching stations real estate to place their towers. Telkomsel also used Telkom's Warung telekomunikasi (telecommunication kiosks), where people, especially in remote areas used to make phone calls, receive fax and browse the net, as its distribution channel. This way Telkomsel managed to overtake Indosat's early start, grabbing almost 60% market share in cellular segment, despite the late start. It was a little harder for Indosat to catch up, as their main asset was the satellite operation, therefore they had less local infrastructure compared to Telkom.

The cellular segment is important for both companies. Telkom's old bread and butter fixed line telephone service is being eaten away by cellular, and both companies' long distance and international services have been facing pricing pressure from disruptive technologies like VoIP. The stock market has been rewarding Telkom pretty well, mostly for the success of its cellular segment. However, it is interesting to note that both Telkom and Indosat are trading at roughly same P/E multiples (18.25), which I think is pretty good deal for both company. I think this implies that the market is not expecting one to grow faster than the other significantly in the future.

I am pretty interested to watch the development of the Indonesian telecommunication segment. In the cellular segment, it seems that intensifying competition has translated to heavy pricing pressure. While annual subscriber growth are still in double digit, Average revenue per user (ARPU) for both providers are declining by about 5% annually. Even Indosat has openly touted price cuts as part of its strategy.

I think that broadband internet will be the next big game, and Telkom has a pretty good head start in this game. Because of Indonesia's low fixed line penetration and vast geographical areas, I think most Indonesians will skip DSL and cable. Indonesia won't really have widespread broadband penetration until 3G service becomes readily available and affordable. Wireless based broadband will be the main access method for both static home and office use and for road warriors alike. It seems telkom has pretty good head start with their coverage and the fact that they own the fixed land-line business, so it can enter the DSL market too.
















Disclaimer: I and people related to me don't hold both Telkom and Indosat stocks

Resurrecting the Blog

OK after more than a year hiatus, I am resurrecting this blog. I plan to use this to randomly rant about whatever comes into my mind about anything from my stock picks, politics, cooking, golf, and so on. And oh, I even sold out and got adsense plastered to this blog. Enjoy!

Poulet Vallee d'Auge

One of the things I do when I have too much time to spare is cooking. I think I can get better bang for my buck by getting good ingredients at Whole Foods and cook my own gourmet meals rather than paying the premium that restaurants charge. Furthermore, I learn something new every time I cook.

One of my favorite meal is Poulet Vallee d'Auge. There are many recipes for this classic Normandy dish, but my favorite is this one from cooking.com. My fiancee called this my signature dish. Aftercooking this many times, I learned that the secret is using a flat skillet and not to use too much apple cider, because if not the sauce tend to separate easily between the oil based cream and juice and the water based cider. I buy clarified butter from Whole Foods rather than making it myself as described in the recipe.