Friday Finance Weekly 68TH Edition

Greetings folks and a warm welcome to 68TH Edition of Friday Finance Weekly. For those of you in Vancouver I hope you are enjoying the sunshine.

Let’s start with the economy:

  • Positive US economic data and soothing words from Angel Merkel was sufficient to drive most global markets upwards. Finland and Germany have effectively but potential Euro breakup conversations to bed (at least for the time being). The Stoxx Europe 600 Index added 0.6 percent at 11:50 a.m. in New York, headed for an 11th week of gains. The Standard & Poor’s 500 Index fluctuated between gains and losses near 1,416, its highest level since April. Spain’s 10-year bond yield fell eight basis points to 6.44%, the lowest since July 5. Ten-year U.S. Treasury yields lost four basis points to 1.80% after yesterday reaching the highest level since May. In addition to the assurances, US consumer confidence is up to 73.6 from 72.3 last month. I’m of the opinion that the Spanish bonds are priced correctly on a risk adjusted basis, but US bonds are mispriced. Especially given the fact that there is still no clear plan to reduce government deficits. Obama wants to spend the US out of a deficit and Romney wants to hang the average consumer with debt.
  • Platinum for October delivery jumped as much as 2.3 percent to $1,468.40 an ounce, the highest since July 6, after 34 people were killed at Lonmin Plc (LMI)’s Marikana platinum mine in South Africa, according to the country’s police commissioner.
  • Oil fell for the first time in four days, paring a third weekly advance in New York, on speculation that its rise to a three-month high was not sustainable. Oil for September delivery fell as much as 62 cents to $94.98 a barrel in electronic trading on the New York Mercantile Exchange. If the economy is indeed recovering, oil should continue its appreciation over the $100/barrel mark.
  • Sources: Bloomberg, Google Finance, Reuters

Let’s get some retail action:

  • With Abercrombie & Fitch Co. giving away 1,000 iPads and J.C. Penney Co. offering $10 million in haircuts, U.S. retailers are pulling out all the stops to make sure they get a share of what may be the best back-to-school shopping season in a decade.  Back-to-school sales, second only to the end-of-year holiday shopping season, may rise 2.5 percent to a record $40.4 billion this year, as consumers replenish wardrobes with more disposable income and an increase in number of students, according to the ICSC.  Retailers, stinging from lackluster sales in the first half of the year, are tempting shoppers with promotions to distract them from anxiety tied to the U.S. economy, where the unemployment rate has been above 8 percent for more than three years. Kmart is providing free flu shots to loyalty members who spend at least $100, and Gap Inc.’s Old Navy gave out backpacks and OfficeMax Inc. coupons to shoppers who spent $50 or more. I must admit that giving flu shots is a truly novel way of sorting the US health care issue. Maybe they will give 2 for 1 heart transplants in the near future. (Source: Businessweek)
  • What was up with those neon-yellow shoes that Olympic athletes were wearing? Two words, ‘Guerrilla Marketing’. As the Olympics wind down, marketing experts are awarding a gold medal in ambush marketing to Nike, which scored with bold commercials, smart PR moves and its distinctive, ubiquitous neon-yellow Volt shoes.  Nike, which always manages a high Olympic profile despite its non-sponsor status, outwitted big-money Olympic backers such as Visa, McDonald’s and Adidas – which reportedly paid $155 million for its official London 2012 sponsorship. “The shoes were one of the first things I noticed during the Games,” said Leslie Smolan, co-founder of Carbone Smolan Agency, a design and branding firm in New York. She just returned from London. “I thought Nike’s approach was absolutely brilliant. Nike managed to integrate themselves into the games — the best way to show your product, not just talk about it.”  So they didn’t pay to be a sponsor, but since athletes can wear whatever shoes they wanted, Nike gave them shoes. Nike is up 1.39% for the week and is presently trading at $95.81/share. Given that back to school is around the corner and the 52 week high is $114.81/share more gains may be in sight. (Source: NBC News)

Chicago staged its annual gun buy-back program in June (a $100 gift card for every firearm turned in) amidst its worst homicide epidemic in years, in which 259 have died on city streets in the first six months of 2012. However, the program appears to be, inadvertently, a win-win project for both anti- and pro-gun forces. The city reported that 5,500 guns were removed from circulation (bringing the total to 23,000 since the program was inaugurated), including several machine guns. On the other hand, 60 of this year’s guns were handed in by a local pro-gun organization, Guns Save Life, which promised to use its gift cards to buy ammunition for a National Rifle Association which supported shooting camp for kids. This is ridiculous; I sincerely hope an American president will take a stand on gun control this year. (Source: Chicago Sun-Times)

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

Sam

Friday Finance Weekly 67TH Edition

Greetings folks and a warm welcome to the 67TH Edition of Friday Finance Weekly.

Let’s start with some tech news:

  • RIM has almost wrapped up its strategic review…there were some rumors about Samsung being interested; however, Samsung has publically stated that these rumors are false. That being said, Bloomberg reported that IBM is interested in RIM’s enterprise service. These are the secure servers that run the Blackberry Internet Service (BIS). Basically nobody wants the phone manufacturing division but the BIS system architecture is of value. These reports have resulted in a 16.6% share price gain for the week and RIM is currently trading at $8.15/share. Such a strategic acquisition will place IBM in a firm footing and increase their footprint in the corporate communication market. IBM’s share price hasn’t moved much this week so we’ll have to determine the reception once a formal announcement has been made. Do you know what the iPhone said to the Blackberry..? iWork…(Source: Bloomberg)
  • Google was fined a record $22.5M over privacy violations. The privacy violations pertain to Google recording the activities of Safari users. Of course the settlement meant that they didn’t have to admit blame. Don’t you love the justice system? Google makes around $22.5M every 4 hours, so the fine isn’t an issue. The market didn’t really care either as the shares are down a marginal 0.34% for the week. I was getting annoyed with Google until I found out their employee death benefit.  A deceased employee’s spouse or domestic partner receives 50% of their salary for 10 years, all share options vest immediately and every child gets $1,000/m until the age of 19 or 23 for full-time students…unbelievable to say the least and one can be certain of Google’s long-term viability. (Source: CNN Money, CBC)
  • Not sure if you’ve heard the news about Ouya, the new gaming console that raised funds on Kickstarter. They were only looking for $1M, but ended up with $8.6M. If they can make it work this platform will have 63,000 immediate users and will use the Android platform. There is a lot of promise with this company and given its backers I am sure it’s going to be a hit. But having too much capital may become an issue and the team may lose focus. Major game publisher Square Enix announced that they would publish games for Ouya…this is serious business.  I am a crowd-funding convert and would like you to contribute to the Perera Foundation for the Advancement of Exotic Gins. (Source: PC World)

News in the world of consumer goods:

  • Nike Inc. has released shoes and wristbands this year that allow athletes to track their performance. Now it’s planning to put sensors on soccer balls and other equipment to offer data to players of team sports. The world’s largest sporting-goods maker this week obtained a patent for an invention dubbed “Nike+ TM” that uses a computerized radar system with transmitters placed on a ball and players to evaluate individual statistics, such as the strength of a shot in soccer and how well a team plays together. Nike is up a marginal 0.02% for the week, so the markets haven’t really reacted. While soccer balls with data are cool, I think Nike should make belts that give feedback. Every time your waste expands the belt should zap you. What do you think? (Source: Detroit News)
  • Lowe’s Cos., the world’s No. 2 home improvement chain, wants to spend C$1.8 billion to buy Canadian competitor Rona Inc., but the struggling Canadian retailer publicly rejected the offer and said its own turnaround plan offered a better chance of success.  Rona, Canada’s home-grown answer to Lowe’s and Home Depot Inc., said the C$14.50 a share proposal was not the best deal for its shareholders. Smarting from years of disappointing sales, it wants to close some of its big box stores and focus on smaller outlets which they say their customers prefer.  At stake is both Rona’s long history as an independent company deeply rooted in Quebec, and Lowe’s attempt to kick start its Canadian expansion by acquiring hundreds of stores and a large national distribution network.  Lowe’s said its plan has the support of institutional shareholders with about 15 percent of Rona’s outstanding shares. Its July 8 proposal represents a 36.7 percent premium to the stock’s closing price on July 6. Rona, like your commercials you are doing it wrong! (Source: Reuters)

New York City’s tap water is already widely regarded as world-class, in safety and taste (and subjected to a half-million tests a year by the city’s Department of Environmental Protection). However, two entrepreneurs recently opened the Molecule water bar in the city’s East Village, selling 16-ounce bottles of the same water for $2.50, extra-filtered through their $25,000 machine that applies UV rays, ozone treatment and “reverse osmosis” in a seven-stage process to create what they call “pure H2O.” The owners of Molecule are a restaurateur/art dealer and a “social-justice activist” who is a “former world champion boomerang player,” That is genius! I wonder if boomerang is an Olympic sport? (Source: Wall St Journal)

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

Sam

Friday Finance Weekly 66TH Edition

Greetings folks and a warm welcome to the 66TH Edition of Friday Finance weekly. Note that I am on a short vacation next week, so the next edition will come out on Aug 10.

Let’s get the party started with some tech news:

  • Samsung is on a roll and has displaced Apple as the bestselling phone in the last quarter. They sold a whopping 52 million phone in the last quarter (beating out Nokia) and in the smartphone market they sold 10 million Galaxy S3’s. Shares trade in the Korean exchange and are up 5.2% this week and has gained 17% for the year. In terms of total gain for the year however, Apple is up 42% and Sony is down 31%. Their strategy has been really smart as they are targeting a lull in the release cycles of iPhones. Android is the operating system that Samsung uses and the sales figures had positive impacts for Google’s shares, up 3% for the week trading at $629/share. Samsung forecasted that the next quarter is going to be strong as well, so expect both Samsung and Google to increase. Also stay tuned to the Samsung Vs. Apple court drama, things are really heating up and Jerry Springer has been asked to mediate. (Source: Financial Post)
  • Okay, I almost feel bad about it, but Facebook lost $10B of its value this week. They IPO’d with a market cap of around $110B and today they are $51B. Shares are down 17% for the week and 37.2% since the IPO. Everything is connected and the weak Facebook results will have impacts with Zynga, which is down 35.42% for the week. Zynga has other problems as they are being investigated for breach of fiduciary duty. On a positive note, Facebook announced that they have purchased a company that specializes in facial recognition. Next time you go to a bar you will be able to snap a picture of someone, find them on Facebook. Research everything about them and magically appear in their lives. Who said romance is dead? (Source: Toronto Star, Reuters)
  • Online shopping for discounted goods is a growing business with many incumbent competitors like Gilt and Beyond the Rack. Amazon today announced that they would enter the market by launching myhabit.com. I checked out their website and while they offer a great selection, it is not fundamentally different from Gilt. It does however have a diverse customer base and is a trusted online source. The market has reacted positively to the news and shares are up 3.85% for the week and is presently trading at $237/share with a market cap of $107B. In other Amazon news, the CEO announced yesterday that same day shipping was impractical. No way really? I thought this already existed, driving to a store and picking something up is similar… no? (Source: BlackFriday Magazine, Amazon)

There isn’t anything major on the economy front other than the usual European saga. That will probably change next week, so I will keep you posted. In the meantime there is some retail news to share:

  • Retailers sued MasterCard and Visa under anti-trust laws. Given their market dominance MasterCard and Visa have been accused to have conspired to fix fees for credit card processing. In general retailers are charged around 2%. A settlement was reached and MasterCard/Visa will pay just over $6B. In addition to the settlement retailers are now allowed to charge credit card users additional fees. Wal-Mart has opposed the settlement saying that it will create a fragmented credit card acceptance system. Frankly  people spend less when they can’t use credit cards, so I am not sure why retailers are fighting it so much. Big-Box retailers probably won’t price differentiate based on the payment method. As a result, consumers will continue to leave small retailers if they adopt alternative pricing strategies. They should have come up with another system that maybe shared the cost of credit card fraud. Visa is up 2.4% for the week and MasterCard is up 2.8% for the week, so the markets aren’t too worried. (Source: USA Today)
  • Heineken NV launched a S$5.1 billion ($4.1 billion) bid to take control of Asia Pacific Breweries Ltd, seeking to push out a Thai billionaire and would-be partner and setting up a battle for the maker of Tiger Beer.  The fight for APB comes amid a wave of industry consolidation and steady growth in emerging-market beer sales, although APB’s ownership structure makes this among the most complicated assets to buy.  Analysts said Heineken’s S$50 per share offer would not be the final play, with rivals Thai Beverage PCL and Japan’s Kirin Holdings Co Ltd unlikely to readily let the world’s third-largest brewer take control of a beer empire stretching from Mongolia to New Zealand.  Heineken’s offer on Friday completed a frenetic week for APB and Fraser and Neave Ltd, a Singapore conglomerate whose joint venture with Heineken has a 65 percent controlling stake in APB. So now for the most important question, with all this consolidation does this mean that beer with get cheaper with economies of scale? Somehow I don’t think this is the plan. (Source: Reuters)

Disgraced televangelist Jim Bakker still owes the IRS a reported $6 million and now sells a line of “survival” products to help true believers live through the coming apocalypse. (It is unclear whether believers need to “survive,” since the popular reading of the apocalypse casts it as a fast track to heaven for the faithful.) So why would you need to survive, wouldn’t a gun be faster? The Talking Points Memo blog did some comparative shopping and found many of Bakker’s items to be overpriced by as much as 100 percent. Bakker also offers the devout a $100 Silver Solution Total Body Cleanse Kit, which includes enemas. (Source: The Atlantic)

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

Friday Finance Weekly 65TH Edition

Greetings folks and a warm welcome to 65TH Edition of Friday Finance Weekly.

Let’s start with some real technology news as it seems like the only thing newspapers cared about this week was the fact that the new CEO of Yahoo is pregnant:

  • Microsoft declared their first quarterly loss in over 20 years…relax, it isn’t the end of the technology giant. In fact this is a fantastic strategy. The search space just isn’t working for Microsoft and they took a $6.19B one-time charge that translated to a quarterly loss of $492M. This week they also announced that Windows 8 will be coming out on Oct 26th which will boost sales. Translation, we are using the oldest accounting trick in the book, ‘taking a bath’. Shares are up 2.47% for the week and are presently trading at $30.11/share. The market is skeptical about the Surface tablet, as significant capital and marketing is required for a successful launch. All things considered I don’t think there is a real competitor to the iPad so they should be fine. Let’s just hope that the Surface fares better with consumers than it did on its launch date, where Microsoft Explorer crashed on the demo. They should have used Chrome. Sorry this is super geeky humor. (Source: Wall Street Journal).
  • While Microsoft can’t find its groove in the search engine industry, Google has delivered yet another stellar quarter. Motorola added $1.25B in revenue and for Q2 Google’s total revenues were $12.21B. Alas, Motorola itself generated a loss of $233M, but Google has said that they are still doing ‘homework’ on the acquisition. Net income increased to 11% and for the week Google shares are up 5.95%, presently trading at $610.82/share. Total headcount including the newly acquired Motorola staff has increased to 54,600. (Source: Information Week)
  • This actually went under the radar a little, but Palo Alto Networks and Kayak both went public today. Palo Alto Networks is a network-security company and they jumped 26% today. Kayak is probably a service everyone is familiar with. The site is basically an aggregator of other travel search sites. Kayak jumped 27.62% today. With total profits at the $4M mark, the company isn’t huge, but is primed from a takeover. That being said, they use airfare search engine software from ITA Software Inc. and the license is set to expire in Oct 2016. Not a huge deal right, except for the fact that ITA is owned by Google, who themselves are developing a travel search engine. Basically Kayak will have to show profits to Google and pray that they get acquired. Let’s hope that Kayak doesn’t pull a Groupon if it comes to that. (Source: Wall Street Journal)

Retails news is up next because the economic news wasn’t very exciting:

  • High end retailer Neiman Marcus is partnering with Target to launch a limited edition 50 product holiday offering. It is going to feature 24 designers included Marc Jacobs and Oscar de la Renta. Adriana Estrata, senior retail strategist for Siegel+Gale was asked to comment and she said “If luxury brands are going to dip into the mainstream pool, they have to remember that people buy luxury because its luxury and they want the luxury experience, whether it’s in person or online.” Okay so is it a good idea or a bad idea? I think it will work out…H&M’s collaboration with Jimmy Choo was very successful. Neiman is privately held, but Target shares barely budged as they were down 0.94% for the week. (Source: Luxury Daily)
  • Nordstrom has finally announced official plans to enter Canada. They will open stores in Toronto, Vancouver, Calgary and Ottawa. I won’t elaborate as this has already been talked to death on my blog. Shares are up a marginal 1.06% for the week and are presently trading at $52.44. Not to be out done, Bloomingdales is supposedly partnering with the Bay to move into Toronto, Vancouver and Calgary. (Source: CTV)
  • GE showed solid growth with revenue up 2.5% and shares increasing by 0.51% for the week. Currently shares are trading at $19.87/share and the market cap is $210.37B. In addition GE announced that its energy would be broken up into three divisions, to cut cost and increase efficiency. Transportation reported the strongest growth with a revenue increase of 27% to $1.6B. GE Capital had a revenue decline of 8%, but profits are up 31%. This is despite a concerted effort by GE to reduce GE Capital’s operations. Let’s face it; the only way customers can afford to do business with GE is if GE itself finances their operations. Wonder how much GE has extended to European countries such as Greece. It’s going to be interesting to see how they absorb a potential break of the Euro. (Source: Reuters)

Japanese Scientists, Over-performing: (1) Researchers at the University of Tokyo’s Graduate School of Information Science and Technology have developed goggles that can enlarge the image of a bite of food so that the eater might fool himself into thinking he has consumed more than he has (and thus, his hunger might dissipate sooner). The software is so sophisticated, they said, that the food carrier (a fork, or the eater’s hand) is not transformed and appears at normal size. In basic tests, according to a June Agence France-Presse report, a 50 percent increase in imagined cookie size reduced actual consumption by 9 percent. (2) Prolific inventor Nobuhiro Takahashi announced in May that he had created a silicone-and-foam “buttocks robot” that can clench, twitch or protrude when probed (primarily for training proctology students to deal with patient anxiety). There is only one thing I am anxiously awaiting…the IPO of these two fine products. How about we just eat less and, I am not even going to comment on the robot. (Source: Daily Telegraph)

Have a fantastic weekend folks.

Please don’t hesitate to forward this newsletter. Many thanks,

 

Sam

Friday Finance Weekly 64TH Edition

Greetings folks and a warm welcome to the 64TH Edition of Friday Finance Weekly. It’s Friday the 13TH, but don’t worry the only thing scary is JP Morgan’s $5.8B trading loss (no big deal right?).

Let’s start with some retail therapy and here are some of the hot topics for the week:

  • This isn’t really retail, but it will impact online retailing. UPS and FedEx have increased their freight rates. Non-contractual less-than-truckload shipments (in simple English it means large items like furniture) on UPS will result in a 5.9% increase. Average freight hikes on FedEx are around 6.9%. This won’t impact standard small parcel shipping (bulk of US orders), but online furniture retailers may take a hit. On a macro level however I do find it interesting that both FedEx and UPS are raising their rates at the same time. Wait isn’t this a definition of an oligopoly? Why isn’t the anti-competitive bureau looking into this? If you want to join the party, buying their stock isn’t a bad idea. FedEx is up a marginal 0.59% for the week and is trading at $91.83. UPS is up a marginal 0.31% for the week and is trading at $79.62. In my opinion the market hasn’t fully absorbed news and we may see earnings bump towards the next quarter. This may result in a short-term gain. (Source: InternetRetailer.com)
  • Groupon is planning to open a retail store inSingapore. Yes you heard that right. So Groupon is a company that sells online coupons, and now they are moving into the retail space. This just doesn’t make sense and for the life of me I can’t figure out why they would move away from their core ‘incompetency’ (online not doing too well) to retail? Honestly it feels like they just want to create a buzz and lift their share price. Wondering what they are going to sell at the Groupon store, some physical goods and computers from which they can buy coupons. Epic fail! For the week Groupon is down 7.25% and is presently trading at $7.82/share. As an FYI, their 52 week high is $31.14/share. (Source: NBCChicago)
  • I’ve talked about Best Buy a fair bit and it looks like they are cutting 2,400 jobs. This results in a workforce reduction of 1.4%. 600 Geek Squad tech support jobs and 1,800 store positions are to be eliminated. This is on top the 50 stores they are closing down, after reporting a Q4 loss of $1.7B. (Source: MarketWatch)
  • Target is coming toCanada, and while they haven’t opened a single store their impact is starting to precipitate. Target has reported that they will hire 27,000 people over the next two years. Goodbye Sears Canada and perhaps Canadian Tire. Wal-Mart actually reduced prices even more in anticipation of Target coming intoCanada. By lowering prices on 10,000 items, Wal-Mart estimates that Canadian’s will save $50M in the month of July alone. Target is up a solid 6.51% for the week and Wal-Mart is up 2.54% for the week. More good things ahead for Canadian retail. I predict healthcare costs will go down as we’ll inhale less car exhaust fumes while waiting to cross the border. Any takers as this being a political platform? (Source: Consensus)

Economic news was also fairly positive today:

  • Stocks in general had a strong rally, as JP Morgan got a boost despite their trading losses. JP is up 5.82% for the day and 6.25% for the week. Share price is presently at $36.00. JP Morgan states they will have record profits despite the massive loss. Warren Buffet further added that “Our banking system is in terrific shape and that can’t be said for banks around the world and it couldn’t be said for our banks four years ago”….wait a minute, doesn’t Buffet own $5B worth of shares in Goldman??
  • Heard about LIBOR (London Interbank Offered Rate)? It’s no big deal, as it is only used to price loans, mortgages and other financial instruments worth over $800T (yes that’s Trillion). Wait; think about this for a second…that amounts to $116,000 for every person on the planet. LIBOR is basically a rate that large financial institutions charge each other to borrow money. It is based on financial reporting of 16 large financial institutions. Well get this Barclays fed incorrect information in 2007 and 2008, to discourage speculation that it was in trouble. Okay, so you lied. Not to worry though, Barclay paid a fine of $453M to US and British Regulators. Mind you this is a company with a market cap of $20.21B. Markets didn’t even react to this news as the share price reduced a marginal 0.91% for the week.
  • The above are a combination of multiple sources: Bloomberg, CBC, Daily Telegraph, Google Finance

Slaved Over a Hot Stove: Delivering gourmet meals directly to the customers` home is a fast-growing business model; with chefs in nearly every large modern city trying to cash in. Thus far, perhaps onlyLondon’s brand-new Housebites goes the extra step. According to its press release, cited by Huffington Post in June, Housebites not only home-delivers “restaurant quality” cuisine (at the equivalent of about $15 to $20 per entry), but offers an optional dirty-pans service (about $8 extra), lending out the containers in which the food was prepared, thus allowing clients entertaining guests to display “evidence” of their culinary skills and hard work. I can see Gordon Ramsey right now “That’s cheating you silly COW”. So dinner at my place, is going to be gourmet! (Source: Huffington Post)

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

Friday Finance Weekly 63RD Edition

Greetings folks and a warm welcome to the 63RD Edition of Friday Finance weekly. My apologies for not getting this out on Friday, I should change the name of the blog to Sam’s whenever I get it out Finance Weekly.

It’s the economy again and things are really on a cliff these days. Seems like we are still getting mixed signals and economists believe that this ‘recovery’ is the slowest in history. A summary of key findings are as follows:

  • The June Employment was released and around 80,000 jobs were created and the unemployment rate was unchanged at 8.2%. Despite all stimulus money that has been injected to the economy Obama has been unable to move the unemployment rate in a material manner. One of Obama’s key messages against Romney was that his private equity firm Bain Capital shipped jobs overseas. Alas, FactCheck.org has determined that this statement is false, so Obama is going to have to use a new line of attack. I personally like Obama, so I would like to change is 2012 campaign slogan to “Okay we couldn’t, but Romney, seriously?”. Hey at least it’s honest. (Source: ABC News)
  • ISM (Institute for Supply Management, yeah it’s a real thing) manufacturing index declined in Jun to 49.7. This was the first decrease since the recession supposed ended in 2009. This index is a measure of what the manufacturing industry thinks future orders are going to be. The higher the number the more manufacturing output is anticipated. The number is supposed to be around 52.0%, so this is a material difference. (Source: Calculated Risk)
  • Don’t worry it’s not all doom and gloom. US Light Vehicle sales are at a 14.1 million annual rate in June. This is a 22% increase from Jun 2011 and 2.6% over last month. One would think that this good news would result in better results for American car manufactures. Unfortunately this didn’t translate to better returns as Ford is down 5.85% and GM is down 1.41% for the week. (Source: Calculated Risk)
  • More good news as construction spending increased in May. The U.S. Census Bureau of the Department of Commerce announced today that construction spending during May 2012 was estimated at a seasonally adjusted annual rate of $830.0 billion, 0.9 percent above the revised April estimate of $822.5 billion. The May figure is 7.0 percent above the May 2011 estimate of $775.8 billion. In my opinion this is a fact that the market didn’t really appreciate. The housing market in the US has broad consequences as it drives up every single sector including construction, banking, transportation and manufacturing. That being said without mortgage reform similar to steps taken in Canada, the US may get in to the same problem. Don’t hold your breath however, if mortgage reform happens, the Supreme Court my deem it a tax (similar to how they classified Obama’s healthcare plan) and the Republicans will get more ammunition during the elections. (Source: US Census Bureau)
  • Office, mall and apartment vacancies are virtually unchanged for Q2 2012. REIS reported that the office vacancy rate for 2012 Q2 was 17.2% and was marginally better than the 17.5% level in Q2 2011. With very limited new office construction, we should see this decrease thereby naturally increase the value of office properties. Vacancy related to apartment properties is at a healthy 4.7% for Q2 2012 compared with 5.9% at the same time last year. Regional malls have a vacancy rate of 8.9% and this is down marginally from 9% in Q1. To put this in a Canadian context, we work with a vacancy rate 4% – 10% in Canada (all properties). There are two conclusions we can draw from this. Wondering why vacancy rates are important? Property values are calculated by taking the net income of the property (total rents or leases) and adjusted for vacancy rates. Higher the vacancy, the higher the adjustment to net income. Hope that wasn’t too confusing. Canadian properties in general are in a much healthier state and supply/demand is well managed. Alternatively it could mean that the property bubble really hasn’t impacted us yet. (Source: Calculated Risk)

So this is officially the economy issue. My take is that the US economy is going to be lukewarm until the US election is over. Fundamentally while the economy is important for US voters, they are generally very emotional on national security. Obama hasn’t overplayed the ‘catching Osama’ story yet. He’s probably saving that for the election. This should sway things his way. Once he wins I don’t think anything drastic will change as he has a long-term view of the US economy. He wants to fix it for generations and gradually increase taxes. While it won’t create booms, it will really put the US on a strong footing. If Romney wins, well the economy will be booming and 2008 will repeat in 2022.

A CNN investigation revealed in May that the Disabled Veterans National Foundation had collected almost $56 million in donations over four years but given nearly all of it to two direct-mail fundraising companies. CNN was able to locate a small veterans charity in Birmingham, Ala., that received help, but mainly in the form of 2,600 bags of cough drops, 2,200 bottles of sanitizers, 11,520 bags of coconut M&Ms and 700 pairs of Navy dress shoes. Another, in Prescott, Ariz., received hundreds of chef’s coats and aprons, cans of acrylic paint and a needlepoint design pillowcase. Said the manager of the Birmingham charity, “I ask myself what the heck are these people doing.” While everything was a little odd, I was actually really surprised they made Coconut M&M’s! (Source: CNN)

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

Friday Finance Weekly 62ND Edition

Greetings folks and a warm welcome to the 62ND Edition of Friday Finance Weekly. The Canada Day long weekend is around the corner and I hope that you have some relaxing plans.

Let’s get started with some retail news:

  • Best Buy which is down 10.31% on a year to date basis saw some life over the last week. Its founder Richard Schulze is considering a buy out to take it private again. The shares were up 9.22% of the week and presently trade at $20.96/share with a market cap of $7.12B. Schulze presently owns about 20% of the company. The market estimates that the buy-out price will be around $30/share, so anybody willing to take a gamble on this event will be rewarded with a return of over 50%. With marginal profits and the current market appetite for leveraged buyout deals being limited, I am not very confident of this transaction going through.  That being said if he can convince a large fund to invest, focus on streamlining operations and moving to a more online platform things may work out well. Their mobile stores are successful and if e-Commerce is developed, Best Buy can become a serious competitor to Amazon. Time will tell, but in the meantime please decline the extended warranty at the BestBuy, the product will outlast the company. (Source: Bloomberg)
  • Starbucks has been experimenting with beer/wine at their stores in the Pacific Northwest and given its success this is being rolled out across the US. Chicago and New York are next on the map, but don’t expect Starbucks to spend big advertising dollars to market this ‘benefit’. Instead they are promoting alcoholic beverages through social media outlets. The market has reacted well to the new business direction as shares are up 15.89% for the year and presently trade at $53.32 with a market cap of $40.44B. In case companies were concerned about drunk employees, Starbucks will only serve alcohol after 4PM. Starbucks has their grove back and if they start private label wine its only going to add other revenue stream. (Source: Brand Channel)
  • Nordstrom is up a marginal 1.57% this week, even though it is virtually unchanged over the course of the year, and is presently trading at $49.69/share with a market cap of $10.34B. That however may change as they announced that they will be opening a flagship department store in New York. In total this will occupy over 285,000 sq ft. One stop shopping seems to be the crazy and I think Nordstrom will fit comfortably between Macy’s and Saks. (Source: Retailing Today)

Economic news is also center stage, this week and with Germany being eliminated from the Euro it looks like Merkel was busy:

  • The EU doomsday fund was authorized to inject monies directly into individual banks. This was previously left to bail out actual countries, but with the banking sector being so big, they had to change the rules. The Euro was up 2% and countries agreed to set up a central banking supervisor. Let’s face it, Europe is heading to a banking union. You thought the protests in Greece were bad, wait until they no longer have any control on their banking. It will be a confrontation of mythical proportions (I was really trying hard there). Hopefully this will reduce the escalating borrowing costs of Spain, Italy and Greece. (Source: Reuters)
  • The Euro news obviously had implications on the US markets as they were dancing.  According to Paul Mendelsohn from Windham Financial Services “You are going to be seeing a nice summer rally out of this. Think of where this market would be if it hadn’t been for the euro crisis”. He obviously doesn’t have my eloquence.  The S&P 500 had its best day since Dec 20 and helped the index to cap its quarterly loss to 3.3%. Analysts expect around 6 – 8 months of growth and purchasing indexes may be a good short-term strategy. On Friday, the Dow Jones was up 2.2%, S&P 500 was up 2.49% and NASDAQ was up 3.00%. All things considered, however the market hasn’t fully absorbed the mediocre retail sales news from Germany and the US. Let’s see how the consumer feels over the next several months. Also the US is having a bit of a heat wave was 1/3 of the US population is in unbearable heat, the cooling costs may put a damper on spending.
  • In the US, Obamacare survived its biggest challenge as the supreme court gave the Whitehouse a green light. While I don’t have specific numbers, the 5 items below are the biggest changes that we can expect (Source: Guardian):
    • Dependent coverage up to age 26: would allow young adults to join their parents’ insurance policies.
    • No lifetime dollar limits on policies. Makes sense, since a terminal disease is terminal. Surprised this had to be mandated.
    • No rescission, or retroactive termination or cancellation of coverage, except in cases of fraud.
    • Preventive care without co-pays: This includes yearly medical visits, blood pressure and diabetes screening and immunizations.
    • Third-party appeals process: an external appeals channel and a process that is “clear and timely.” About time, maybe Michael Moore can find a new job.

Almost all companies that collect customer data publish their policies on how they keep the data “private” (even though those “privacy” policies almost always explain just precisely the ways they intend not to keep the data “private” — and are not required to by law). Researchers writing in the journal I/S: A Journal of Law and Policy for the Information Society (summarized in an April post on the blog TechDirt.com) found that if typical consumers bothered to read all of the detailed privacy policies they encountered, it would take from 181 to 304 hours per year (22-38 workdays), depending on shopping habits. (If every consumer in America did it, it would take from 40 billion to 67 billion hours a year, or 5 billion to 8.3 billion workdays a year.) The average wage in the US is $21.70/hr. My calculator crapped out on me when I tried to calculate potential loss productivity, but basically it is impossible to read all the legal docs we are supposed to sign. Hope that defense works when people default on their mortgages. (Source: Techdirt.com)

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

 

Sam

Friday Finance Weekly 61ST Edition

Greetings folks and a warm welcome to the 61St Edition of Friday Finance Weekly. My apologies for not getting an edition out last week, things got a little hectic. Hope you didn’t miss me.

Let’s start with my traditional strength, technology. A quick summary of this week’s news is as follows:

  • I’ve been saying that Microsoft has a lot going on for them and this week they turned the tablet PC market upside down. Honestly their competitor to the iPad, the Surface, looks amazing. It’s got USB ports, HDMI connectors and the list goes on and on. But coolest function is that the cover turns into a keyboard with a track pad. Genius! Microsoft has been humble and slowly growing under the radar. With the new tablet, Windows 8 and a refreshed XBOX console (coming out late 2013), Microsoft is back and expect it to yield long term profits. As of this morning, Microsoft is up a marginal 0.96% and is trading at $30.29 a share. Markets in general aren’t doing so hot, so this isn’t a surprise.(Source: Techcrunch, Google Finance).
  • More Microsoft news, as they ventured into the social media space by purchasing a company called Yammer (basically social media networks for companies).Purchase price was a cool $1.2B. Not really sure if this is a good purchase, but they may incorporate this into their Exchange services and enhance internal messaging. Perhaps this will morph into a service that can measure the mood of the organization. Or this service may give you some insight into what your co-workers are actually doing. Bet you can’t wait to see updates on what everyone’s having for lunch or better yet, what you tube video they are watching. The bright boys as Microsoft obviously see something I don’t just like what Facebook saw in Instagram. (Source: Bloomberg)
  • Google announced a stock split that was highly unusual in nature. The 2 for 1 split will also ensure that the original founders retain 56% of the voting power. It’s simple, they issued a new Class C round of shares with no voting power. So everybody with a Class A share was also given one Class C share. This effectively cut the value in half. In essence the company can continue to issue Class C shares without altering the voting power of the three original founders. While the transaction was simple, I was surprised that it was approved by the board and as a result there is a law suit. CEO Larry Page couldn’t make the annual shareholders meeting due to a voice difficulty. No details were given, but we all know it’s due to the fact that Page was shouting for joy all last week. Google is presently trading at $568.60 and after the split it will be trading at $284.30 a share. The shares are up marginally (0.73%) for the week. Personally I think they should have done a 4 for 1 split so that the share price would get around the $140/share mark. (Source: Yahoo News (go figure))

Now for some retail therapy, Friday Finance style:

  • Esprit (yeah they are still around for some reason), had a 22% drop on Wednesday followed by a 14% drop on Thursday as the CEO/Chairman resigned. There is speculation that the company is ripe for a takeover. Honestly who wants to buy a company with generic, pastel colored clothes? An upcoming brand should make a push to acquire their retail locations throughout Europe, anything else is bound to be a failure. Most of the losses recovered on Friday’s trading, but I don’t have much hope for this stock.
  • This is more tech-ish, but Dell is planning over $2B in cuts over the next three years. I actually thought it was their projected loss for the next three years. The consumer has moved on to more portable computing platforms and they just haven’t kept up. The question is how quickly can they turn into an IBM? Shares are down 1.54% for the week and it is apparent that investors are taking a wait and see approach.
  • The uber (just kidding) hip brand Elizabeth Arden has partnered with Justin Bieber and Nicki Minaj. For Justin Bieber, it will be interesting to see if he makes perfume for his female fans, or if it will be just for men.  The market hasn’t caught Bieber fever as the share price increased a marginal 0.16% for the week, trading at $37.10 a share. Given that very few men want to smell like Bieber, I am guessing it’s for the girls. Or maybe the Old Spice guy can change his slogan to, if you don’t buy him Old Spice, he’s going to smell like an adolescent boy.
  • In general the economy has been confused, but Michael Kors seems to have done everything right. Their Q4 results have illustrated a tripling of profits. The company is actually based in Hong Kong and is poised to capitalize on the growth of the middle class population in Asia. Mind you, the numbers are relatively small with the latest quarter generating $43.6M in profits, compared with $13.6M on a year over year basis. Shares are up a healthy 7.7% for the week and presently trade at $42.32 a share. Given the relatively low profit figures, I would make a long term play for this share, but I would wait until the middle of Summer before pulling the trigger.
  • Source for this section is from Consensus Advisors.

This is more out of pure interest, but I was curious as to how the whole venture capital industry got started. With that in mind there is a fantastic documentary called Something Ventured, that follows the rat pack of venture capital, Tom Perkins, Arthur Rock and Don Valentine. The most interesting thing to come out of this documentary was the fact that investors ultimately invest in people. On that note, when Intel was seeking venture capital, they didn’t even have a business plan. When asked for one, they gave the following one pager:

Unbelievable – that’s all I can say. (Source: Documentary – Something Ventured)

According to a February investigation by the Fresno Bee, two homeless, penniless men in Fresno, Calif., are setting a high bar, for frequency and expense, of ambulance trips to the hospital. A 41-year-old who says he has “…a major problem with [his] liver”, and a 51-year-old allegedly seizure-prone man called for a combined 1,363 trips in 2011 (wait, there are only 365 days in a year, so that’s multiple times a day), which at the market rate would have cost them $545,000 (apart from evaluations by the hospital, which would have additionally cost more than $500,000). Taxpayers and the insured foot the bills (reduced somewhat because the ambulance company and the hospital take lower fees). Neither the ambulance company nor the hospital can refuse to serve the men. I have an idea: why don’t we just house these people next to a hospital? At least that would have save Fresno $545,000. (Source: Fresno Bee)

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

Sam

Friday Finance Weekly 60TH Edition

Greetings folks and warm welcome to the 60TH Edition of Friday Finance Weekly. This is the new and improved format which will include the following: technology, global economy, commodities, retail and of course comic relief. Don’t worry I won’t include all sections in every newsletter.

Let’s start with technology. There was a lot going on this week and a lot more to come next week:

  • It is rumored that Apple is going to ditch Google next week, as they announce a competitor to Google maps on the iPhone. To steal Apple’s thunder, Google made a surprise announcement on their new and improved Google Maps which will feature full 3D maps of cities.  Google further announced that they now own a fleet of planes for mapping purposes.  Google shares are up 1.66% for the week and trade at $580.45/share with a market cap of $189B. (Source: Vancouver Sun)
  • Apple is planning to make a big splash next week at their annual love fest, also known as the World Wide Developer Conference. Rumor has it they are launching a refreshed line of Mac Book Pro’s, new operating system and possibly a small version of the iPad (I thought this was the iPhone, but apparently I’m wrong).  Shares are up 3.45% for the week and given that it isn’t close to its 52 week high of $644.00 (currently at $580.32/share); there is actual room for appreciation.  Especially when we consider the possibility of the iPhone 5 coming out in October. (Source: Techcrunch)
  • Samsung announced that the much anticipated Samsung Galaxy S3 is coming to Canada on Jun 20th and to the US on Jun 21st. After looking at the specs on this phone, I must admit that it is leap years ahead of the existing iPhone 4S. No wonder Apple is filing an injunction to prevent the sale of this phone in the US. Apparently the slide to unlock function on the Samsung violates an Apple patent…Seriously? That’s it? (Source: Mobilesyrup)

Well, in this sector it appears that everyone is suing each other, check out this cool visualization:

 

Basically, the technology companies decided that they will continue to ensure that new law graduates stay employed for a long time. (Source: Android Authority)

 

Who’s suing who?

The US stock market showed signs of life this week, as rumors of a Spanish bank bailout precipitated:

  • Dow Jones increased by 435.63 points (increase of 3.59%), NASDAQ is up 110.94 points (increase of 4.04%) and the S&P 500 is up 47.62 points (increase of 3.37%). In addition Obama made it clear that he expects a quick resolution to the banking crisis in Europe. Wait, didn’t the US increase their debt ceiling a day before they were about to default on their obligations?  Ah, never mind…yes we can!  (Source: Wall Street Journal)
  • China keeps their economic status closely guarded and it was interesting to note that they are planning to reduce borrowing rates. This is somewhat worrying as it shows a softening of their economy. In fact this was the first rate cut since 2008. While the economy still grew at an annual rate of 8.1% for the first quarter, it is the slowest growth rate in three years. (Source: BBC World)
  • Alright, so I’ve been going on and on about a possible break up in the Euro. Here are 4 ways it could happen:
    • Greece or another country may leave. No way? Is this really a possibility? Preparations would be in secret and would basically happen overnight. New currency would be issued at a 1:1 level with the Euro, but we would see a large drop a day later, something like 30% – 50%.
    • Everyone leaves the Euro at once. This is expected to be painful, but short-lived. It would be similar to the option described above, except everybody would leave at the same time.
    • Return to the original national currencies. Similar to the option of a new local currency, but everyone would revert to their original exchange rates at the creation of the Euro. This wouldn’t favor former Slavic countries that have developed considerably since the introduction of the Euro.
    • We could split the Euro in two and group countries based on their economic might. For example France and Germany would be together, whereas Spain, Portugal and Greece would form another group. This would be my preference, as European countries are notoriously bad in debt management. Having some form of centralized debt management obligations is good for long-term stability.
    • (Source: BBC World)

 

The late Pennsylvania Congressman John Murtha was a Capitol Hill powerhouse, and among his legacies is the federally funded airport located in his district; largely served him and the local companies heading to Washington, D.C. to lobby for government contracts. (By contrast, the Pittsburgh airport is nearly 60 miles away).  Murtha died in 2010, but the airport (which cost $150 million in earmarked funds to build, upgrade and maintain) still, according to an April Yahoo News dispatch, handles only three flights a day, all from Washington, D.C. Not to mention that about $100 of every passenger’s ticket price is subsidized by the federal government.  Why didn’t they just provide fuel subsidies to drive the 60 miles? (Source: Yahoo News)

Have a fantastic weekend folks and please let me know what you think of the new format. Please do not hesitate to forward this newsletter. Many thanks,

Sam

Friday Finance Weekly 59TH Edition

Greetings folks and a warm welcome to the 59TH Edition of Friday Finance Weekly. Yes, I know you are getting sick of the latest reality show ‘how low will Facebook go’. It is a good business, but it’s just way overvalued. Shares are down over 25% since inception. Also some interesting news that came out after the IPO, turns out that over 40% of accounts on social media sites are spammers. (Source: Bloomberg)

Don’t you love it when companies actively manage their assets to ensure long-term success. Nike announced that they are selling Cole Haan and Umbro. The rationale for letting go of Cole Hann is pretty obvious. Dress shoes were never meant to be comfortable and despite Nike adding air soles to Cole Haan’s, they never looked good. Selling Umbro seems to be a mistake in my opinion. Adidas is the existing heavy weight in terms of soccer and getting rid of Umbro will give Adidas free reign in that segment. Nike has their own soccer branded products, but lack the authenticity of Umbro. That being said Nike sponsors the Brazilian soccer team, so maybe Umbro isn’t essential. Buy-out prices haven’t been set and the market hasn’t reacted favorably to the news. Nike is down 2.4% for the week and is presently traded at $104.62/share with a market cap of $40B. On a year-to-date basis they are up a healthy 8.85%. Given the current retail landscape and consumer confidence levels, I don’t think Cole Hann and Umbro will get premium dollars. Private equity seems to be the natural home for Cole Haan and Umbro. I doubt this would happen, but I think Adidas should make a run for Umbro and completely control the soccer market. In addition the MLS (officially the third most popular sport in terms of attendance, surpassing the NBA and NHL) is getting popular in North America. Having a strong soccer brand would be helpful for Adidas. Nike shares should increase once details of a purchase precipitate, the company will have additional cash and can focus on growing their core brands. In addition Nike recently won the NFL contract and this will boost sales. All things considered, the biggest money maker is going to be Tiger Woods branded Nike underwear with the slogan “Just Do It”. (Source: NY Times Deal Book, Google Finance)

Bail-Out season is back. This time it’s got a Spanish flavor. Interesting fact, believe it not, but the Canadian (GDP of $1.58T) economy is similar to size to Spain (GDP of $1.41T) The Spanish Prime Minster announced that they are going to give a $24B bail-out package to Bankia. Shouldn’t be a big deal right, but turns out, investors don’t think Spain can afford to do so and their sovereign bonds jumped to 6.63% (personal mortgage for 5 years in Canada are 3.49%)! In addition it is apparent that foreign investors are selling Spanish bonds (foreign now own 37% of Spanish bonds, compared with 50% in January). This banking bail-out is due to Spain’s real-estate collapse. Germany’s 2 year bond fell to 0% and this gives you an idea of the disparity in terms of European bond pricing. In general economic news has been grim this week. The Stoxx Europe 600 index dropped 3.1% over the course of the week. Over the course of May, European stocks are down 7%. In the US, nonfarm-payroll increased 69,000, but the expectation was an addition 165,000 jobs. This pushed unemployment from 8.1% to 8.2%. So what’s next? Summer! Just kidding. We won’t see much action in the US until the elections are over. Nobody is in a rush to rock the boat, but the US has some tough decisions to make. Interest rates can’t be close to 0% forever and eventually they have to start creeping up. That being said, the US housing market is starting to show signs of improvement with the S&P Shiller composite index of 20 metropolitan increased by 0.1%. On yeah, we started by taking about Europe right? They are done, the Euro should be broken up and everybody needs to take a siesta. (Source: Wall Street Journal, Value Walk, Bloomberg, Google Finance)

Here are the Stanley Cup odds (probably the last time, considering the way LA is playing):

 

Team Wins Odds

NJ

        3,524

1.8 : 1

LA

        6,476

.5 : 1

       10,000  

 

The stats speak for themselves. (Source: Mark Harrison – Sports Guru)

Crime Does/Doesn’t Pay: Convicted embezzler Antoinette Galluzzo, who admitted stealing more than $50,000 from a city youth agency in Englewood, N.J., was ordered in April to pay “restitution,” but the amount Judge Eugene Austin settled on was $10 a month — and only during the period of probation (three years). On the other hand, in federal court in New York City in April, Kerry Haggard, 47, was sent to prison for 6 1/2 years on one count of selling fake movie posters. Well I am sure that youth agency probably didn’t need the money and we all know that movie posters are priceless. Who makes fake movie posters? Seriously! (Source: AP, Athens Banner-Herald)

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

Sam