Ali:
<<Why throw something, with no redeeming value, into a thread that lives with the
knowledge that profits are away a bit ??...Really, what the hell are you talking about ? Spell it out for me . I'm really dense.>>
In the words of Yogi Berra, "Sometimes I feel like this is deja vu all over again."
In short, I don't believe reiterating the fundamental flaw with Winstar is a statement of "no redeeming value." 3-4 months ago, I went to great lengths to point out the economic flaws of Winstar. I was subsequently yelled at, ridiculed, and told to get lost. Perhaps if some of you had listened, you would have saved yourself a tremendous amount of money. Of course everything looks clearer with 20/20 hindsight, but I did try to warn you.
A business idea, no matter how promising, is still ruled by the laws of economics. In a roaring bull market, it is easy to hide blemishes. People are falling all over themselves to provide capital, no matter how risky the proposition. Witness the internet sector. Up until August, if your business ended in .com, people couldn't get enough of your paper. Forget losses. Forget cash flow. The conventional wisdom was that there will always be a new crop of investors willing to pay ever higher prices for new stock certificates.
This "conventional wisdom" lasts in a bull market until there is some psychology change. I believe we are witnessing such a change. No longer are investments deemed "foolproof." Not when Asian customers are defaulting, and big American banks are losing $300 million a pop because of worthless investments in Russia.
Now the market is redigesting the fundamental truth that sometimes investments go to zero.
Now I'm not saying this will happen to Winstar. They have a viable business model, as long as the flow of capital continues, demand doesn't dry up, and technological change doesn't render wireless local loop obsolete. But, whereas before the market was willing to focus on the "greed" of such a proposal, and ignore the negative cash flow implications, investors are now realizing that EBITDA losses are coming straight from their pockets. Your pockets.
As long as real losses continue around the globe, I believe the market will continue to wrestle with the prospects of losses. In such an environment, companies with large cash flow losses, such as Winstar, no matter how promising, will not be rewarded.
In times of trouble, those companies with increasing earnings, accelerating growth rates, and legitimate accounting, are rewarded more than normal.
As such, I continue to go on record, that even after a 50% decline, Winstar is still too risky an investment. The market is apparently agreeing with me.
Regards,
JC |
