Interesting Day Both for Our Businesses and the Financial Markets

On April 30, 2010, in Investing, My E-Commerce Businesses, by Joshua Kennon

Exciting day … quite a bit of stuff happened at the companies, but I’m not comfortable discussing it (and probably won’t at any time in the future).  Suffice it to say, an opportunity presented itself that could have huge growth potential for one of our major businesses.  It just changed my plans for the rest of fiscal 2010 because it requires my attention.  It is a key component in our intentions for this business over the coming 36 months.

Bought Some More Berkshire Hathaway Shares

The market crash in the financial sector gave me an opportunity to pick up some more shares of Berkshire Hathaway for our blue chip reserve fund, which is held by one of the operating companies (the stocks that we think will compound at 8% to 11% over the coming decades and don’t really care what they do in the short-run; they could literally fall 50% tomorrow or go up 50% tomorrow and we wouldn’t pay any attention).

The Goldman Sachs Mess

I do wonder why the government is going after Goldman Sachs now that the markets have finally calmed, 401(k) balances for the average investor are above where they were in 2008 when this mess started, and profits are rising on corporate balance sheets, which means employment will inevitably follow.  Doesn’t anyone remember that the suit against Hank Greenburg at AIG failed because of lack of evidence, the suit against Lehman Brothers failed because the prosecutors couldn’t make a case to a grand jury (where the bar is much lower) … the government is costing people money right now and doing it to score political points.

So far, I’ve spent a few minutes looking at prices on Goldman Sachs options, but not enough to form an opinion.  It could be interesting.

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The 2009 Tax Filings Came Back from the Accountants!

On April 9, 2010, in My E-Commerce Businesses, Taxes, by Joshua Kennon

Mr. Monopoly Does the Happy Dance

Mr. Monopoly is doing the happy dance today!

The accounting firm sent back our 2009 tax filings and it appears manageable.  (This is where you hear a massive, collective sigh from all of us at headquarters.)

By using Simplified Employee Pension accounts, mortgage interest deductions, and so-called “tax loss harvesting” techniques on our investments, we were able to drastically lower our taxable earnings.

It is a one-time, one-year reprieve, though, because the two new businesses are starting to pay off and I get the feeling we’re going to get a very, very large bill for the 2010 tax year.  And that’s fine because, in the words one one famous author, “I aspire to a tax problem.”  There are people who pay $100 million or $1 billion in taxes a year.  I hope to someday be one of them.  (I never understood people who are already rich going to prison to save a little bit more money by cheating on their taxes.  The logic completely escapes me.)

This means that over the next year, we should have strengthened the balance sheet further.  Mount Olympus Awards is already debt-free over than short-term accounts payable that are covered by current assets, and by Christmas, we hope to have everything in the businesses and personally paid off except for a small collection of loans that total roughly $336,000 and are at fixed rates of only 2.5% to 5.5% for the next 20 to 35 years and – you guessed it – are tax deductible!

Given that we generally dislike debt, why don’t we pay these off early?

There are a few reasons: (more…)

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The Success of the iPad Will Come Down to App Development

On April 7, 2010, in My E-Commerce Businesses, Technology, by Joshua Kennon

The iBook Store in iPad

After 5 days with the iPad, I can tell you it is not hyperbole ... the iPad is going to revolutionize business and personal computing. Those who point out there are more powerful tablet PCs are making the same mistake Steve Balmer did when he said the iPhone would fail because it lacked a keyboard. They are missing the point. I have a maxed-out Power Mac with two (2) 30" High Definition monitors that could process videos for Pixar and yet I still have switched to the iPad for all of my reading needs. And I love paper and pen ...

Five days or so into my experience with the iPad and it continues to exceed expectations (by far). I’ve spent somewhere between $120 and $150 in the Apple iTunes App store, which compared to my previous purchases of apps (read: $0), means there is more cash flowing into Steve Jobs’ coffers. The overwhelming indication continues to be that the success of the iPad will come down to the applications that software companies develop for it. We bought our iPads for business purposes. As an Internet company, the easier we can access data, the better we can respond to customer needs.

Business Productivity on the iPad

The main benefit of the iPad is it allows us to monitor profits, costs, bills, and customer messages in real-time across all of our businesses. I can see, quite literally, sales flow into our sporting goods business or baby retailer as I sit on the balcony drinking coffee and listening to Coldplay’s Viva la Vida (which I’ve had on repeat all day). I can monitor our investment positions and submit complex options positions with a few clicks (er… taps). It has allowed me to get up from my desk and spend time elsewhere, greatly improving the quality of life.

If I’m already using the iPad to revolutionize our trading and investing positions, can you imagine when software companies develop high-end apps that allows medical records to be wirelessly access by doctors or nurses? What about lawyers that can access case law databases?

Books on the iPad

The Apple iBook store can be great. It’s just not there, yet. There isn’t nearly enough selection, especially when compared to the Amazon Kindle (which explains why I use the Kindle app and buy books from Amazon for the iPad). I should have the ability to print directly from the iPad any page I’ve noted, complete with my markups. Imagine what that would do for business productivity.

Games on the iPad

On the gaming front, there are a lot of things that could make the iPad a game changer. For example, if Square-Enix were to release the Final Fantasy games up through FFIX, I’d buy them in a heartbeat, no questions asked. If I can play Monopoly with my family members wireless over a network connection, regardless of physical distance, I’d be thrilled because it would be another way to spend time together. (more…)

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Four New 64 Gigabyte iPads for the Business!

On April 4, 2010, in My E-Commerce Businesses, Technology, by Joshua Kennon

IPad for Business Review

By converting our online systems to iPad enabled applications and systems, our staff can literally adjust inventory levels at the retail stores and online sites, update order statuses for individual customers, capture credit card transactions, and calculate sales, profits, and cash flow in real-time all from the company iPads. It is going to revolutionize the way we do business. This doesn't even include the fact that I can now tap into our brokerage firms and place complex global securities orders in a matter of seconds.

After dropping Jocelyn off at the airport yesterday morning, Aaron and I went to Barnes & Noble to get a range of additional business books. We then returned home, Aaron decided to go to his parents’ house and paint Easter eggs with his nephew and mom.

A series of events then lead to my parents and I driving to the Apple store in the Country Club Plaza in Kansas City, buying four (4) new 64 Gigabyte iPads with matching leather cases, as well as a new 32 gigabyte iPhone for my mom. The total came to about $3,600. We then went to dinner at Houstons steak house, which was excellent. The last time I had eaten there was with Ellary and Aaron when she was in town for a conference.

The iPads are so much more than a consumer device. It took only a few minutes and we had installed the specialized trading applications provided by our brokerage firms, giving us access to world markets. In virtually no time, we can convert United States dollars into Euros or Swiss Francs, place complex option orders for securities around the globe, and check our total exposure to certain asset classes and individual issuers. It is going to change our lives.  And that’s just the capital markets trading operations, not the operating companies.  That is where things get exciting … (more…)

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Some Changes in the Portfolio

On March 25, 2010, in Investing, My E-Commerce Businesses, by Joshua Kennon

Campbell Soup Stock Certificate

We added some shares of Campbell Soup Company to the Blue Chip Reserve portfolio today. They are fairly conservative; I don't expect more than 8% to 11% compounded out of them over the next decade.

Aaron and I are wrapping up all of the tax documents for fiscal 2009 before shipping them off to the accountants, listening to the new Goldfrapp album, and tweaking the investment portfolio a bit.

I liquidated a respectable portion of the LEAP stock options we bought on General Electric during the crash now that it is approaching $19 per share, or at least was during today’s trading session.  The time premium was no longer adequately reflecting the risk, in my opinion, especially relative to the deep-in-the-money options in the same series.

I also added some Campbell Soup shares to the blue chip reserve portfolio (this is the “dumb money” collection of high quality, dividend paying stocks we build as an insurance policy in the background of some of our operating businesses where we anticipate no more than 8% to 11% returns compounded, but that serve as a backup source of high quality liquidity and long-term compounding).  The company is silently and secretly using almost as much cash repurchasing shares as it is paying cash dividends. (more…)

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Cherrywood Capital Group Launches

On March 22, 2010, in My E-Commerce Businesses, by Joshua Kennon

Cherrywood Capital Group Stock Certificate Joshua Kennon

Cherrywood Capital Group serves as a collection of niche market e-commerce retailers operating under a collective brand name. It was capitalized with 40,000 equity shares issued to me (14,000), Aaron (14,000), and Kelsey (12,000).

Over the past 18 months, Aaron, Kelsey, and I have been working on the formation of a new company, Cherrywood Capital Group (dba Cherrywood Shops), which will serve as the parent company to several of our retail businesses including Just Baby Gifts, Wonderful Wedding Favors, and more.  We capitalized the firm by issuing 40,000 equity membership units (“shares”), of which I own 14,000, Aaron owns 14,000, and Kelsey owns 12,000.

The operating agreement is a slightly modified one as that drawn up by our law firm, Polsinelli Shughart, for several of our other businesses, ensuring that everything from estate considerations and buy outs are resolved long before they could become an issue.

For example, if Kelsey were to get married, the shares cannot be transferred to a spouse or else the remaining original founders will have the right to buy out the other party at a mere $100, regardless of the market value of the stock.  This was designed to protect each of us and our families from the potential of what we call the “Annie Nichole” problem.  Obviously, this isn’t a problem right now because the shares aren’t worth much as a start-up, but if we repeat the success we’ve had in all of our other businesses, they will be someday. (more…)

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