Investment Decisions … for example

Would you like to have an edge over others when making investment decisions? Of course, you would. KMI can help you get that edge. Using the principles in Mr. Koenig's book, "Getting the Truth," we can help you make better decisions whenever you are relying on what others say or tell you.

See our pages on "Getting the Truth." Please look at the discussion regarding Oracle's earnings conference (First quarter 2011 earnings call, September 16, 2010, from www.speakingalpha.com), specifically the comments by President Safra Catz regarding the guidance for 2Q. Here is the transcript:

See how President Catz refers to her corporate guidance. My markings in the 3rd paragraph show her first referring to this guidance as "the guidance," then "the guidance," then "our guidance," and finally, in the 7th paragraph, "my guidance." The giver of the statement must explain these significant changes. If the communicator does not explain, we must assume the literal meaning. "The guidance" shows no commitment. "Our guidance" reflects some commitment. "My guidance" shows full commitment.

Further, she introduces her guidance statement in the 3rd paragraph with "the guidance I'm giving." When anyone begins a statement with "I'm giving," "I can tell you this," or "This is what I can share with you," etc., you cannot rely on what follows. You can't depend on it because the person stating it is not committing. They are qualifying their statement. Thus, they are not committing to what they subsequently state.

So, we cannot rely on what Ms. Catz tells us until the 7th paragraph sentence, where she now commits to giving "my guidance," there is no "I'm giving" that prefaces it. She doesn't say "this guidance" or "the guidance I gave," which one could misconstrue as a summation. She differentiates this sentence by calling it "my guidance," which is entirely different and now very personal. Now, and only now, can we rely on what she tells us in this sentence: "my guidance assumes a GAAP tax rate of 30.5% and a non-GAAP rate of 28.5%." In short, we need to rely only on the speaker's literal commitment.

Based on this analysis and Ms. Catz's prior remarks (see below), I opine that Ms. Catz is much more ebullient in her own guidance than the corporate guidance she gave. As an investor, I'd like to know that a chief executive is more enthusiastic about corporate guidance than the guidance she is actually providing.

(From www.seekingalpha.com ORCL Q1 2011 Earnings Call Transcript, underline & italics my edit):
• "So, in addition to our strong top-line performance in hardware and software, we delivered very strong operating margins as usual. With Sun included for the full quarter, our operating margin was 39%, substantially higher than our peers, including IBM and SAP. Actually, our 39% operating margin is 10% higher than SAP, even though we are also selling hardware."
• "So, let me get to the guidance, and we do believe that the guidance I'm giving is realistic though conservative."
• "I want to emphasize that our pipelines are very strong in both software and hardware."

Coupling your fundamental and technical analyses of your investments with the principles in "Getting the Truth" will provide you with the information to make better and more informed investment decisions, whether those investments are in stocks, bonds, real estate, or mergers and acquisitions. We can attend conferences and provide you with on-the-spot evaluations of essential presentations, or we can work off transcripts or oral/video recordings. In short, if you rely on what someone writes or says, we can help you.

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