Money. Its what all the landscapers do here in the winter so I figured it was a natural complementary business. The money is pretty good too. For a residence you’re looking at $250 a month for sidewalk and driveway. If you can string a few of these nearby you’re golden. But on the commercial side is really lucrative. A strip mall will net you $2-3k per month, though you’ll need a Bobcat. One guy I know does a mid-sized condo complex parking lot and charges $12k per month. He works about 40 hours clearing it a month on average. That’s with a truck plow. The downside risk is huge constant snowfalls as pricing is fixed.
^Maybe you can create a derivatives forward/futures market for snow plowing services.
But you do have a full-time finance job, right ? Or are your business associates in the landscaping business full-time landscapers that are thinking about the snow-clearing business for the reason you mentioned ?
I do have a full time finance job. I have some folks I work with that do this stuff full time though. I don’t do much of the physical work as I’m at the office during the day, but I do pitch in. And I’m in a corporate job and I’m an efficient worker so I have plenty of time during the day to… Multitask. Another advantage of not being in a highly demanding role. But no reason why I can’t clear a parking lot after work for another few thousand a month…
^^^^
Very interesting perspective.
^Or you could just be a “dispatcher”. I have a couple of those as clients.
Basically, you have almost no capital investment, and you don’t do any work. All you do is get a couple of the landscaper/snow clearers to work with you, and you go about getting business. Print up flyers, advertise, take calls, and schedule the work. You get 10% (or whatever) of the gross for the job. Then you print the invoices, mail them out, and take care of all the bookkeeping.
Works well for you, because all you do is office work, and it works for them, because they’re not doing a bunch of office work that they don’t know how to do, or don’t have time to do. (It’s hard to field calls and line up new business when you’re actually out mowing a yard.)
Pitfalls - you could run out of cash. Say your dudes do $1000 worth of work, and they expect their money at the end of the week. However, your customers don’t pay you until the end of the month. You’ve still got to pay the workers, with no money in the bank account. And you could end up chasing bad debts.
^ This is pretty much what I did with the landscaping job. However, finding trusted tradespeople and workers to do the jobs is tough, and thankfully I had. Out here labour is so competitive guys actively bid away your workers, and there is zero loyalty in commodity labour. So that is a potential issue. Some guys pays you $2,000 a month to clear snowfall from his lot within 24 hours of accumulation and you “dispatch” your guy to go clear it, only to find the guy down the street bought him away. My solution to this is to finance a competetent worker’s equipment and just have the labour aspect freelancing. Unless the guy can go buy a truck ASAP, he will be working for me. But running it as a partnership is key to this too.
^Funny. I heard a similar story out here.
A guy who’s a homebuilder in El Paso hears that house prices are skyrocketing in the Permian Basin. So he buys some land, subdivides it, and brings a team of ten people out here to build houses.
Within a week, all ten people have taken higher-paying jobs in the oilfield. Guy returns to El Paso with no men and no homes built.
Just goes to show that there’s such a thing as an economy that’s too good.
Here’s a summary of the misery if anyone is interested.
http://www.joshuakennon.com/gt-advanced-technologies-bankruptcy/
There was an over-reliance upon a single vendor – check
The auditors warned shareholders in the SEC filings of a material deficiency in the internal accounting records – check
There was a note in the SEC disclosures that the financing arrangement could make it impossible to continue as a “going concern” due to a cash short-fall – check
There were no major contingency plans or back-up capital sources available if the iPhone 6 and iPhone 6 Plus launches were missed. – check
The CEO allegedly had a history of what seems to be a near megalomaniacal desire to swing-for-the-fences – check
Apple had no minimum purchase commitments, and no exclusivity contract, so demand projections were entirely speculative. – check
Don’t worry though, the market is totally efficient. It’s normal for billion dollar plus market cap companies to have this many red flags all in one place, shrug it off and keep buying.
I disagree with the article that it was the right idea though. Management were (apparently) crooks but this was a bad business model any way you cut it, likely ending as a total commodity prone to capital destruction in a best case scenario. These “investors” clearly did zero meaningful due diligence. All the “check points” above were knowable in under 1 hour of work. I was short 50 bps strictly on the premise that mobile phone suppliers are terrible, management is crazy promotional, and the guidance numbers were clearly not achievable. Looks like there were embedded bonuses in terms of fishy accounting and internal controls. I had no idea it would go bankrupt (got totally lucky) but the entire premise stunk to high heaven.
The stock market is where dreams go to die. This game is stacked against anyone dumb enough to put their entire life savings in one stock. I wouldn’t go so far as to say the market is rigged against individual investors but it’s pretty close. At a minimum you have to be “not stupid” to even have a chance.
This comment wins the thread: That can’t possibly be where the economic value will accrue, especially with a company like Apple that is known for being merciless in negotiating with suppliers.
Indeed sir, indeed. It’s not clear why this isn’t immediately obvious to any experienced investor or anyone who has taken even one year of business school.
==
One thing that always puzzles me is the fascination with Apple suppliers. A friend of mine made the analogy that always trying to find the next hot Apple supplier is like being fascinated with the people who supply onions to the Michelin-rated restaurant. That can’t possibly be where the economic value will accrue, especially with a company like Apple that is known for being merciless in negotiating with suppliers. I mean, if you think mobile is eating the world, why don’t you just invest in AAPL as part of a diversified portfolio? It, like other blue-chip stocks, should make you rich eventually with dividend reinvestment. I suppose the appeal of getting rich quick blinds people to the possibility of getting rich slowly.
Indeed it is rigged against retail investors on the trading / execution side and on non-transparent companies / frauds.
However, I think that this is hardly relevant for long-term investments in decent companies.
A retail investor with a diversified, long term list in good stocks will beat a hedge fond with an agressive bet on the wrong stocks, even if he is getting screwed on execution.
Bromion, I love your post (# 50).
me too, great post
Jeezus. The below items are taken from GTAT’s 10-Q filed on August 7, 2014, about two months before the bankruptcy.
We have recently incurred losses and have utilized significant cash resources in our sapphire material operations, if we are unable to generate sufficient cash resources from operations in the near future, we may need to raise additional funds to continue our operations, which may not be available on favorable terms, or at all. We incurred a net loss of $127.8 million in the six month period ended June 28, 2014. In addition, our cash and cash equivalents decreased from $498.2 million at December 31, 2013 to $333.1 million at June 28, 2014. We have not received the fourth prepayment amount under the Prepayment Agreement and there can be no guarantee that we will satisfy the technical and performance metrics necessary to receive such prepayment amount in the near future, or at all. We expect that we will need to continue to use cash resources for certain capital expenditures and certain other expenses in connection with completing the ramp-up, and the on-going operation, of our sapphire material operations, principally in Mesa, Arizona. Our sapphire material operation resulted in negative gross margins in the three months ended June 28, 2014. We anticipate that we will continue to incur negative margins at this facility until we are able to achieve volume manufacturing at our target cost structure. We cannot guarantee that the Mesa facility will operate profitably in the near term, or at all. In order to achieve profitability, among other factors, management must successfully execute the planned strategy at the targeted cost structure, including: improving performance and efficiencies of the equipment, tools and processes used at the facility; training the large employee base on efficient and effective operations; and driving down the costs of consumables used in the process. If we are unable to successfully take these steps, we may be unable to operate the business profitably, we may default under our convertible notes, our prepayment obligations under the Prepayment Agreement may be accelerated (or we may not be able to satisfy such payments when otherwise due) and/or we may not have sufficient cash resources to operate our business. This may require that we take steps to increase our cash resources, including raising additional funds in the public or private market, selling assets, or taking other steps. If we are unable to do so, we may not have cash resources to operate as a going-concern.
ha
ha
ha
Can someone give me a quick synopsis on this? So GTAT were supposed to supply AAPL with sapphire screens for iPhone 6 but AAPL were not obligated to buy. They didn and this along with “behind the scenes” management fraud led to Chapter 11?