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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Michael Burry who wrote (7257)	5/21/1999 1:22:00 AM
From: James Clarke	Read Replies (2) \| Respond to of 78476

Nice work, Mike. I still would not touch this with a 10 foot pole due to the rapid meltdown risk in a recession, the unknown quality of the real estate (I suspect its poor), and that it "smells bad". But very nice work on the accounting, and I see where you're coming from. JJC

To: Michael Burry who wrote (7257)	5/21/1999 11:52:00 AM
From: Grommit	Read Replies (1) \| Respond to of 78476

SVR - beating a horse to death perhaps. I appreciate the posts which are dampening my enthusiasm a bit. A few more points from me. I think that the liquidation scenarios are interesting and if liquidation value was higher than mkt cap there would be reassurance. So the focus is on going concern value -- since liquidation value is doubtful. I do not understand this, please explain if you will. As long as it can continue increasing AR then it can borrow more at 85% of the increase, but obviously this results in a necessary deceleration in sales growth. 85% is better than 70%, but it's not 100%. I see the risk to profitability margins as the kicker. Maybe this comes from the cost side with development or acquisition costs increasing. But I have recently read analysts supposing that ASPs might degrade due to internet effects. They suppose that the resale mkt for timeshares might develop on the net which would compete with the marketing of new units. I think this is a valid concern. On the other side, internet marketing might lower the marketing costs of the new units. I think the overall economics on a simplified level are that you get a ton more revenue by selling the resort a week at a time than you do by selling the condo whole. As long as the extra marketing costs and higher commissions are covered by the pricing, condos will continue to be converted/developed to timeshares. The other industry concern is that you always need to find new customers. No repeat business -- or very little. I am trying to think of what other sectors/industries have that problem. Capital Equip of some sort of course, on the industrial/commercial side. On the 'retail' side -- What do you only buy one of -- but many people buy none of - in your lifetime? Hot tubs? Housing? Life Insurance? Wedding dress? :o) Who else always need new customers? Consider this a trivia question for fun. And are those sectors' valuations affected by the continuous hunt for customers who may decide never to appear? You can tear yourself to pieces trying to micro analyze this. And there is value to it, of course. I am not knocking your analysis. But flavor it with the overall picture. They say that demographics is favoring the industry's continued growth and the Marriots, Hyatts, Hiltons and Ramada Vacation Suites are validating the sector -- they are validating the micro economics that you are tearing you hair out for perhaps? thanks, grommit