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September 2010



Bonds vs. Gold vs. Land

September 30, 2010 – Comments (8) | RELATED TICKERS: GLD

The bond market is pricing in deflation with low yields going even lower. Meanwhile, gold soars to new highs, suggesting increasing risk for serious inflation. With both markets moving strongly in opposite directions, pricing in extreme situations on both ends of the deflation-inflation spectrum, one has to wonder if the right bet at the current time is for a normal economy with mild inflation, which would typically be the most crowded camp but now seems somewhat deserted. My opinion? Everyone is looking for black swans these days, but the white ones are still the most common. And even if you believe normalcy isn't the most likely outcome, it's probably got the best odds (risk/reward) out of the three.   [more]



GIGM: Net-Net Stock With Upside

September 23, 2010 – Comments (2) | RELATED TICKERS: GIGM

GigaMedia is a Taiwanese gaming stock with market cap a bit over $100 million. They completed a transaction in April in which they sold 60% of their gambling business for $100 million in cash to a French company called Mangas Gaming (implying $167 million for 100%). They have some kind of deal that's like a put option to sell the other 40% in the next few years. They also have about $60 million in cash on their balance sheet and over $20 million in marketable securities. Total liabilities is a little over $70 million. In the most recent quarter they made a little over $1 million in net income. So the way I see it, it's a company with liquidating value of maybe $180 million selling for $100 million, and it's profitable.

As for the upside - they recently partnered with Blizzard to distribute Starcraft 2 and their other games in Southeast Asia. The first Starcraft was very popular in Asia and I expect the second to be as well. I'm not sure how their deal with Blizzard is structured, but it'd have to be pretty bad to not have an impact on their bottom line, considering how tiny this company is and how much Starcraft 2 will probably sell. Also, GigaMedia expects to record a $60 to $70 million one-time profit on the Mangas deal. Neither the Starcraft sales nor the one-time gain were included in their most recent financial statement, expect a huge profit next quarter.   [more]

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