Friday Finance Weekly 88th Edition

Greetings folks and a warm welcome to the 88TH Edition of Friday Finance Weekly.  With the tragedy in the Philippines, I feel compelled to ask you to consider supporting the relief efforts there. Please consider Doctors without Borders http://www.doctorswithoutborders.ca/ or the Red Cross http://www.redcross.ca/

As usual let’s start with a dose of technology:

  • Sony’s new gaming console officially launched in North America today. Most stores were open at midnight to satisfy the cravings of eager gamers. They expect to sell at least 3 million units by the end of the year, so it’s big business for Sony. In terms of corporate strategy, Sony played it extremely well. PS4’s specifications were announced after the XBOX One (Microsoft’s new gaming console), yet the console itself is coming out a week ahead of the XBOX One. Sony was able to ride negative publicity generated by the XBOX One in relation to Digital Rights Management (DRM). Originally the XBOX One was to have always-on DRM, meaning that games wouldn’t work without an internet connection. This was primarily to prevent sharing of old games. Based on the public backlash, Microsoft later backtracked on it the DRM issues, but keep in mind that the PS4 is a $100 cheaper as well. Well done Sony, it’s been a while since you got things right. This is also reflected in the stock market as their shares are up 11.29% for the week and currently trade at $18.62. Now all they have to do is stop making unprofitable TVs, bad movies and questionable cellphones. (Source: Gizmodo, Google Finance)
  • Twitter’s IPO has led to a renaissance of tech IPO’s. Zulily, the daily deals site targeted at mothers, opened on the NASDAQ this morning under the symbol ZU. Things are going well since the company priced 11.5 million shares at $22 late last night, as shares jumped to a high of $41.32 this morning and presently stand at $38.20. I don’t think this party will last and daily deal companies have no real competitive advantage. I will save you from one of my Groupon rants, but suffice to say their shares are down 58.87% since inception (less than 2 years ago). On a macro-level however, I do feel that online services targeted to new mothers will be a growth area. Mothers are busy and with the new PS4 coming out their husbands will be busy for the foreseeable future. (Source: Techcrunch, Google Finance)

Suffering from a debt hangover, a pickup in borrowing will give the world’s biggest economy (yes it is still America) a much-needed boost next year as federal government austerity pinches growth. Workers will be more willing to take out loans as the lowest unemployment rate in almost five years bolsters job security, while banks will be more likely to lend after cleaning up their own balance sheets. The resulting gains in personal spending will help counter the effects of federal-budget cuts that are weighing on the expansion, according to Ben Garber, an economist at Moody’s Capital Markets Research Inc. in New York.  Falling foreclosures, bankruptcies and defaults on consumer loans all point to improved balance sheets as the economy continues to expand. Home-foreclosure filings fell to about 129,000 in August, down 65 percent from a peak of about 367,000 in March 2010, according to data from Realty Trac Inc. Combining this with the fact that the IPO market is picking up gives us a positive outlook for 2014. (Source: Moody’s)

People With Too Much Money: In April (2008) the Swiss watchmaker Romain Jerome (which the year before created a watch made from remnants of the Titanic) introduced the “Day&Night” watch, which unfortunately does not provide a reading of the hour or the minute. Though it retails for about $300,000, it only tells whether it is “day” or “night” (using a complex measurement of the Earth’s gravity). CEO Yvan Arpa said studies show that two-thirds of rich people “don’t (use) their watch to tell what time it is,” anyway. Anyone can buy a watch that tells time, he told a Reuters reporter, but only a “truly discerning customer” will buy one that doesn’t. (Source: Wall St Journal)

Have a fantastic weekend and for my American readers, Happy Thanksgiving! Please don’t hesitate to forward this newsletter.

Many thanks,

Sam

Friday Finance Weekly 87th Edition

Greetings folks and a warm welcome to the 87TH Edition of Friday Finance Weekly. It’s been a while since I last wrote, but the last several weeks have been very hectic. Okay let’s get down to business.

Let’s start up by getting caught up on some technology news:

  • Biggest piece of news is the IPO of Twitter. The initial list price of the stock was $26/share, but it soon spiked to $50/share. Now it is around $42.53/share, giving the company a market cap of around $23B. I still don’t understand Twitter and more importantly it’s not making any money right now. The market sentiment is that one day they will figure out how to monetize Twitter. Let’s hope it doesn’t follow Facebook’s IPO where they started at $38/share and gradually fell to as low as $17.55/share. The biggest issue I have with Twitter is that I don’t see a lot of applications for it. Facebook for example can data mine your entire life and sell it to corporations. Posts (or tweets) on Twitter are random and are often re-tweets. How much information can you get for re-tweets of re-tweets? (Source: Reuters)
  • Google is in the news again as they are releasing their latest Google Nexus 5 phone. There is only one word to describe this phone: unreal. Let’s put this into perspective. A 32GB Google Nexus 5 costs $399, iPhone 5s $819, Samsung S4 $699. I will let you do the math, but suffice to say that Google has a clear pricing advantage. Even in terms of functionality the Nexus 5 easily competes with the iPhone. The Google news keeps on rolling as they announced details on their mysterious barges that are appearing on the waters of coastal cities such as San Francisco. Yes you read that right, there are opening up floating interactive spaces where people can learn about their technology. Is that cool or what? Shares have performed extremely well over the last 30 days as there was a gain of 18.99%. Currently the shares are trading at $1,015.80/share. For the love for Christ, Google, please do a stock split! (Source: Google Finance, Gizmodo, BBC)
  • The Alibaba Group out of China is about to go through an IPO and this is one worth getting in on. For those of us in North America, Alibaba is a Groupon, Amazon, eBay and PayPal all combined in one. Company is offering $18B – $25B with a projected market valuation of $110B. Expected IPO in late January to mid-February. Company has a healthy gross margin of around 74% and is very profitable. All I can say is ‘Open Sesame’. (Source: Privco)

Things in the US economy appear to be picking up. Home prices posted the largest annual gain since housing bubble days in August, although the month-over-month gain slowed for the fourth straight month.  The closely watched S&P/Case-Shiller home price index increased 12.8% from a year earlier, the biggest 12-month gain since February 2006. But with mortgage rates significantly higher in recent months, the pace of increases is slowing. The 1.3% rise compared to July is only half the monthly increase posted in April when mortgage rates were near a record low. Still, the recovery in the housing market continues to be strong, helped by a drop in foreclosures that were weighing on overall prices. A drop in the unemployment rate is also helping to support the housing recovery. If the US government can keep the tea party militants at bay, things may continue to improve. (Source: CNN Money)

A quick retail snapshot:

  • Walmart is promoting 25,000 employees in the fourth quarter as it wraps up a year-long campaign highlighting opportunities for career development and financial stability at the company.  The world’s largest retailer and the nation’s largest private employer kicked off the on-the-spot surprise promotions at ceremonies in its Secaucus, N.J., store and about 15 other markets including Atlanta and Denver. It’s dispatching top executives to stores nationwide for similar events for the rest of its fiscal year, which ends in late January.  The mostly hourly workers will be promoted to different jobs – some to store management positions – and will receive higher pay and increased responsibility. The promotions are going to employees who have already applied and interviewed for the positions, says spokesman Kory Lundberg. This is basically a publicity stunt and I wonder if they simply reallocated their marketing budget. Regardless, I am happy that 25,000 employees will be getting a salary bump. Shares this week have barely moved and the stock is up 0.71%. (Source: USA Today)
  • The Container Store, long a favorite of crafters and obsessive organizers, now appears to be a hit with investors as well.  In the company’s first day trading on public markets last week, its share price has already doubled. Container Store packaged its IPO late on Oct. 31, selling 12.5 million shares for $18 each, the high-end of its expected range. The deal valued the retailer at $828 million, slightly more than its $707 million in sales last year.  But even at that price, Container Store, which is headquartered in Coppell, Tex., near Dallas, appears to have left quite a bit of money on the table, given the swift doubling of the IPO price. I am always amazed by the simple philosophy of doing one thing really well. These guys only sell boxes and bins! (Source: Business Week)

While Congress struggled recently to pass a budget or an increase to the national debt limit, one program made it through rather easily, according to a September New York Times report: farm subsidies for inactive “farmers.” The subsidies were renewed, based on a 2008 law, virtually assuring that more than 18,000 in-name-only farmers (who received $24 million last year) will not be cut off. Included, according to a 2012 Government Accountability Office report, were recipients at 2,300 “farms” that had not grown a single crop in five years (including 622 without a crop in 10 years). (Source: NY Times)

Have a fantastic long-weekend folks and please don’t hesitate to forward this newsletter. I will do my best to keep up the Friday newsletters.

Cheers,

Sam

Friday Finance Weekly 86th Edition

Greetings folks and a warm welcome to the 86TH Edition of Friday Finance Weekly. Let’s get into action right away.

Blackberry’s shares were up today on speculation that the company would be taken private. Over the course of the week its shares are up just over 10%) for the week. This isn’t a bad idea as BB is constantly in the public eye, and by trying to satisfy the whims of the market, they are not focused on innovating. BB 10 was approved for use by the Pentagon and this fact didn’t even hit the radar this week. There are rumors that Silverlake (private equity firm) may be the preferred partner. Note however, that nothing official has started. Silver Lake is caught in a bruising $25-billion battle to take Dell Inc. private. Should it succeed in the Dell buyout, one possibility could be for it to collaborate with BlackBerry in mobile computing, where the PC maker has struggled to gain traction, the source said. All things considered, BB’s market value is under $5B (from a peak of $84B) and is ‘affordable’ for most large private equity firms. Do you know what the iPhone said to the Blackberry? “iWork”. Hey I tried. (Source: Globe and Mail)

Hilton Worldwide, the global hotel chain that is currently a portfolio company of The Blackstone Group, is in the process of preparing for an IPO. Its private equity owner has selected four lead underwriters: Bank of America/Merrill Lynch, Goldman Sachs, Deutsche Bank and Morgan Stanley. Parallel to the IPO, Blackstone is also reported to be looking to refinance $13 billion of Hilton’s debt. Hilton’s 2007 leveraged buy-out (LBO) by Blackstone, valued at over $26 billion, was the largest ever in the hospitality industry. Under Blackstone and its current management, Hilton has grown its global capacity from 480,000 rooms in 2007 to 575,000 rooms in 79 countries in 2012. Since the LBO they have also acquired 1,100 new properties and operate over 10 brands. This is going to be one of the biggest hospitality success stories in history and is a prime example of private equity done right. I would make a joke about Paris Hilton but that would be too easy. (Source: PrivCo)

Amazon.com is looking to bring in more than 5,000 workers to staff its growing network of U.S. distribution centers.  The No. 1 e-tailer operates more than 40 warehouses across the country, and opened eight in the last year alone as it seeks to improve order fulfillment and reduce delivery time.  The jobs include picking, packing and shipping customer orders for Amazon and its expansive network of third-party sellers, and are located in nine states including  Arizona, California, Delaware, Indiana, Kentucky, Pennsylvania, South Carolina, Tennessee and Texas.  The company is also hiring more than 2,000 full-time, part-time and seasonal customer service posts. There are also rumors about a new Kindle Fire HD to be released and this will further increase Amazon’s competitive position. The e-Book space is heating up with Overstock.com, Apple and Amazon fighting for your dollars. This has had an impact on the share price as it is down 2.24% for the week. Honestly I prefer physical books as I can put them on the shelf and feel guilty for not reading them. When I pay for an e-Book, not reading it seems perfectly normal.  (Source: Twice)

A Russian man who decided to write his own small print in a credit card contract has had his changes upheld in court. He’s now suing the country’s leading online bank for more than 24 million rubles ($727,000) in compensation. Disappointed by the terms of the unsolicited offer for a credit card from Tinkoff Credit Systems in 2008, Dmitry Agarkov decided to handwrite his own credits terms. The trick was that Agarkov simply scanned the bank’s document and ‘amended’ the small print with his own terms. He opted for a 0 percent interest rate and no fees, adding that the customer “is not obliged to pay any fees and charges imposed by bank tariffs.” The bank, however, didn’t read ‘the amendments’, as it signed and certified the document, as well as sent the man a credit card. Under the agreement, the bank OK’d to provide unlimited credit, according to Agarkov’s lawyer. “The opened credit line was unlimited. He could afford to buy an island somewhere in Malaysia, and the bank would have to pay for it by law,” the lawyer stated. Wow, that’s all I can say. My only question is why would he want to buy an island in Malaysia? Wouldn’t the South of France be better? (Source: RT)

Have a fantastic weekend and enjoy the sunshine. Please do not hesitate to forward this newsletter. Many thanks,

Sam

Friday Finance Weekly 85th Edition

Greetings folks and a warm welcome to the 85TH Edition of Friday Finance Weekly. We have finally transitioned to a new system so I hope you like it. After having a month of sunshine it looks like the rains are back, but at least you won’t have to water the garden over the long weekend.

The biggest retail news this week was that Saks is going to be purchased by the Hudson Bay Company. Yes, a Canadian retailer is purchasing an American one. The offer is for a total of $2.4B. The Bay had to do something to fend off Nordstrom’s launch into Canada and what better brand than Saks. In Canada, a total of 6 – 7 Saks stores will be opening by way of new construction and conversions of existing stores. In addition, twenty five Saks Off 5TH stores are planned as well. The brands will operate as two entities and as a result, the management of Saks will remain in New York. In general Saks hasn’t performed well compared with Neiman Marcus and Nordstrom as it has been burdened by underperforming stores. The company has gone through some cost cutting and now runs 41 stores compared with 54 in early 2007. Overall good move, especially for the Bay, but I think Nordstrom is going to come out on top. In my opinion there is a real gap in friendly, high-end fashion retailers and this is a clear differentiator for Nordstrom. Saks is more of the same, maybe a little more traditional than Holt Renfrew. The markets have reacted well to the HBC take over and the shares are up 6.12% for the week. All things considered, I don’t think the selection in Canada was the issue, it was always price. Hey at least it will boost up Canada’s employment figures. (Source: Bloomberg)

Alternative currencies are all the rage and if you need help understanding some of the major ones a recent TED talk provided a good perspective. Please find the top 5 biggest/most interesting (in my opinion) below:

  •  Bitcoin: The world’s best-performing currency, according to Kemp-Robertson, Bitcoin’s value is tied to the performance of a computer network. It’s “completely decentralized—that’s the sort of scary thing about this—which is why it’s so popular,” Kemp-Robertson says. “It’s private, it’s anonymous, it’s fast, and it’s cheap.” Bitcoin is a case study in the increasing desire to place trust in technology over traditional institutions like banks.
  • Litecoins: A virtual currency based on the Bitcoin model, Litecoins have a higher limit: “The number of coins that can be mined is capped at 21 million Bitcoins and 84 million Litecoins,” explained a recent Wall Street Journal post, which also noted that Bitcoins are worth more and currently accepted more widely.
  • Tide detergent: This is a barter system that’s about as far from government-backed as you could get: in 2011, it was discovered that across the US, thieves had been stealing 150-ounce bottles of Tide detergent to trade for $5 cash or $10 worth of weed or crack cocaine. An article in New York Magazine from earlier this year details the fascinating story and what it says about Tide’s super-successful branding. Link to the article: http://nym.ag/Uzhrb6
  • Linden Dollars: Linden Dollars, usable within the online community Second Life, can be bought with traditional currency or earned by selling goods or offering services to other Second Life residents. Many people earn actual Linden salaries—some to the tune of a million Linden Dollars. Don’t get too excited though 1M Linden Dollars is around $3,950 USD at the moment.
  • Starbucks Stars: Use of Starbucks’ Stars is limited not to a particular geographic locality, but to the corporate ecosystem that is Starbucks. Once you get a Starbucks Card, you can earn Stars—which buy drinks and food—by paying with the card, using the Starbucks app, or entering Star codes from various grocery store products. According to Kemp-Robertson, 30 percent of transactions at Starbucks are made using Stars.

If you have time over the long weekend and wanted to explore the other currencies please refer to the original article: http://bit.ly/16ed4CZ To be honest all these alternative currencies are a bit of a blur to me and now when someone says, “I am a millionaire”, you actually have to ask, “what kind”? Imagine a complication of filling out a personal net worth statement at a bank? (Source: TED Talks)

America is still the world’s biggest source of capital, but a tightening of their immigration system is making it harder and harder for entrepreneurs to set up shop. So what’s the solution? A company in the US has come up with a novel way of approaching this issue. They are building a cruise ship 12 nautical miles from the coast of San Francisco (international waters) that will house 380 startups. Companies will have to give up equity in addition to $1,200 – $3,000 a month. There will be a ferry that goes directly into San Francisco and work permits won’t be required. Residents on the boat will only require visitor visas that are considerably cheaper to obtain. Great idea, but the company is still in fundraise mode. Also, small matters such as policing need to be considered. In my opinion this seems too much like a modern day version of Alcatraz. (Source: Blueseed.co)

The low-price air carrier GoAir of New Delhi announced in June that in the future it would hire only females for the cabin crew — because they weigh less than men (and expects eventually to save the equivalent of $4 million annually in fuel based on average weights). I am sure saving fuel was the only reason. (Source: The Times of India)

Have a fantastic long weekend folks and please don’t hesitate to forward this newsletter. Many thanks,

Sam