Friday Finance Weekly 48TH Edition

Greetings folks and a warm welcome to the 48TH Edition of Friday Finance Weekly.

Getting depressed at the gas pumps? Well guess what? Relief is on the way as prices fell by an astounding 2.5%! This is primarily due to the fact that Obama indicated that striking Iran will paint the Arab state as a victim. Oil was traded at just over $106 a barrel on the New York Mercantile Exchange.  Obama’s public comments set the tone of his meeting with Netanyahu on March 5. Israeli’s Prime Minister has expressed growing frustration with Iran and has taken an increasingly combative stance. In addition to growing fears of a Middle East conflict, prices rose over reports of a fire (initially thought to be an act of terror) at a Saudi oil refinery. Markets started to stabilize when it was determined that the fire did not damage production or refinery capabilities. Spring and Summer are traditionally the busiest travel seasons so oil is probably going to increase over the next several months. Iran is however starting to feel the heat of American and European sanctions as they have been cut off from the oil market. India’s largest shipping company had to cancel a contract for Iranian oil after its European companies refused to provide insurance. There are however reports that China is now purchasing oil from Iran at a discounted rate. So wait, America puts pressure on Iran and this makes Chinese companies even more competitive, obviously what we need. Well I guess the Republican party is already doing a great job of screwing America. Santorum’s comments in relation to Obama’s desire to see every citizen go to college was “Oh, I understand why he wants you to go to college. He wants to remake you in his image, I want to create jobs so people can remake their children into their image, not his.” Seriously? (Source: CNN, Reuters, Bloomberg)

I tried to avoid Apple talk, but the company just hit $500B in market cap. The stock is up 4.36% for the week and is presently trading at $545.18/share. Rumors are that the iPad 3 will be announced next week and the market is expecting it to be a game changer yet again. Unconfirmed reports have indicated that will it have a retina display (same as the iPhone 4(s)), 4G capability, Siri support and a better camera. To me it seems like the iPad 3 should really be an iPad 2.5, similar to the iPhone 4s, but one must never underestimate the Apple consumer. Apple has also launched a PR campaign to demonstrate its economic impact on the US job market. A study undertaken by the Analysis Group indicates that Apple is responsible for 514,000 jobs in the US. The breakdown is as follows, 47,000 Apple employees, 257,000 in direct employees (FEDEX, UPS and other component makers) as determined by the very scientific Type 1 multiplier (no idea what that means) and 210,000 application developers.  In addition Apple goes on to state that the call center in the US costs them 50% more than if they were to move it off shore. As of Dec 31, 2011 Apple had over $30B in cash on their balance sheet. Why don’t they really stimulate the economy by starting a sub-prime mortgage company? That way consumers can over-leverage their homes and purchase even more Apple products. Wait I think GE already did that. (Source: Washington Post, Google Finance)

We generally feature a weekly NHL play-off section and I wanted to give a sneak peek. According to National Post, 91 points is the magic number:

(Source: National Post)

When Leona Helmsley’s now-deceased dog, Trouble, inherited about $12 million from her estate in 2007, it called attention to the occasional decision by lonely rich people to pass on millions of dollars to their pets. In December, the former stray cat, Tommasino, inherited the equivalent of about $15 million in Italy when his owner, real estate holder Maria Assunta, died at age 94. The only pets richer than Tommasino were the German shepherd Gunter (equivalent of about $140 million in 2000) and the Australian chimpanzee Kalu (equivalent of about $60 million, though the estate he inherited was revealed in 2010 to be worthless). I have the idea for my next television series “Real House Dogs”. (Source: ABC News)

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

Sam

Friday Finance Weekly 47TH Edition

Greetings folks and a warm welcome to the 47TH Edition of Friday Finance weekly.

Sell Dell, this according to Odlum Brown! The latest earnings came out this week and the market initially reacted by dropping Dell by around 5%. Over the course of the week however shares have recovered and are trading at $17.43 (represents a decrease of 1.8% for the week). Revenue figures were disappointing with an increase of only 1% compared with a projected increase of 5% to 9%. Adjusted profit margin was up 24% and this beat market projections of 6% to 12%. Overall the numbers themselves are not terrible, but analysts are concerned with the lack of future earnings guidance provided by the firm. There is a consensus that the reason Dell isn’t providing guidance is because the company is expecting to face serious challenges in the years ahead. This fact combined with a 19.14% increase in the share price on a year-to-date basis, makes Dell seem like a stock headed for correction. From a strategic perspective, Dell seems to have lost its way by trying to grow in non-core areas. They recently launched a phone/mini-iPad/tablet device called the Dell Streak and this was a total failure. Now the company is entering the VOIP market. Wait aren’t they supposed to be making computers? While I believe the stock will come down to earth, on a long-term basis they should promote their highly successful line of ‘designer’ computers branded under Alienware and compete head on with Apple. Then again, this is the same company that sold 11.8M computers with a 97% fail rate between 2003 and 2005. According to court documents they replaced faulty equipment with more faulty equipment. Okay the secret is out of the bag; Dell was simply trying to provide social interaction coaching for their computer repair guys. (Source: Odlum Brown, Google Finance, Gizmodo)

I am going to take a break from my normal format and provide some analysis on my thoughts on the Euro. The article below will be appearing on the institute B blog later next week.

Is it time to break up the Euro?

With Greece in the news constantly, we must ask ourselves, is it time to break the Euro? The US Dollar has long been the gold standard as the world’s reserve currency and the Euro was supposed to be its closest competitor. Euro is presently used by 17 counties as their exclusive currency and it encompasses over 326 million people. While it looks great on the surface one has to wonder how countries with such varying and different socio-economic environments are expected to live in harmony. Here is a snap shot of key economic data:

 

Country GDP (current US B$) GDP growth (annual %) GDP per capita (current US$)
Austria  $                              379 2.31%  $                   45,209
Belgium  $                              469 2.27%  $                   43,144
Cyprus  $                                23 1.04%  $                   28,779
Estonia  $                                19 3.10%  $                   14,345
Finland  $                              239 3.64%  $                   44,512
France  $                           2,560 1.48%  $                   39,460
Germany  $                           3,281 3.69%  $                   40,152
Greece  $                              301 -3.52%  $                   26,600
Ireland  $                              211 -0.40%  $                   47,170
Italy  $                           2,051 1.30%  $                   33,917
Luxembourg  $                                53 2.68%  $                105,438
Malta  $                                  8 3.15%  $                   19,991
Netherlands  $                              779 1.69%  $                   46,915
Portugal  $                              229 1.39%  $                   21,505
Slovak Republic  $                                87 4.24%  $                   16,061
Slovenia  $                                47 1.38%  $                   22,851
Spain  $                           1,407 2.31%  $                   30,542

 

You are probably wondering why a country with an economy of $3.2T (Germany) is sharing the same currency as Estonia which has an economy of $19B. The difference in economic conditions is staggering. In addition we have 4 countries, France Germany, Italy and Spain that represents over half of the total GDP figure. When we take it a step further there are countries with per capital GDP’s ranging from $105,538 (Luxembourg) to $14,345 (Estonia).

By all accounts countries such as Estonia have a long way to go before reaching the economic development of a country like Germany.  The initial thought was that countries such as Estonia can reduce foreign currency exchange risk for investors. As a result investors only have to focus on investment specific risk and consider the merits of individual projects. While this is a great idea in practice, the fact of the matter is that countries such as France and Germany are the real source of power and influence of the Euro.  Hence France and Germany drive almost all decision making in relation to the Euro. Germany for example is a well-developed economy and has the tendency to manage inflation (similar to Canada) by ensuring that the economy doesn’t get overheated. Therefore when the growth rate exceeds 3% they increase interest rates. The increased cost of borrowing reduces growth and more people move funds into T-Bills and other government investments. This in turn increases the value of the Euro in relation to other countries. I know what you are thinking, isn’t this a good thing? While it is great for Germany, Estonia needs exactly the opposite. Estonia for example needs to grow as much as possible and need to have lower interest rates and a cheaper currency to increase foreign investments. Since Estonia has little clout with the Euro, Germany’s interests will generally prevail.

How on earth did they expect balance such differing interests? Then we wonder why Greece is having problems at this time. Yes there was significant government mismanagement but without the ability to effectively manage currency, Greece has to act like a Germany. How is this possible when the per capita GDP of Greece is $26,600 and Germany’s is $40,152? We should break-up the Euro and only include countries with similar economic development. The only thing Greece has in common with the rest of Europe is the use of olive oil to cook everything. (Source: World Bank, Yours Truly)

A November Comtel airlines charter flight from India to Birmingham, England, stopped in Vienna, Austria, to refuel, but the pilots learned that Comtel’s account was overdrawn and that the airport required the equivalent of about $31,000 for refueling and take-off charges, and thus, if the passengers were in a hurry, they needed to come up with the cash. After a six-hour standoff, many of the 180 passengers were let off the plane, one by one, to visit an ATM, and eventually a settlement was reached. So next time you fly, don’t forget to pack a few thousand dollars just in case your plane runs out of fuel. (Source: MSNBC)

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

Sam

Friday Finance Weekly 46TH Edition

Greetings folks and a warm welcome to the 46TH Edition of Friday Finance Weekly.

Ever heard of Yelp, well you will in next several weeks. Yelp is an online mapping, sharing, review and search site. It is generally geared towards finding activities within a local area. The site has the ability to integrate with Facebook to analyze what your preferences are. Scary thought right? The company is only 7 years old and is looking to enter the IPO market. The IPO target price is $12 – $14 per share and this values the company as high as $840M. In total, before investment banking-related expenses the company expects to raise $115M. In my opinion they are trying to cash in on the elevated level of interest in the industry, due to other successful IPO’s for LinkedIn and Zynga. According to information filed with the SEC, Yelp’s numbers are less than impressive. In total they have had cumulative losses of $41M with a loss of $17M and revenues of $83M the last year. Google offered $500M for the company in late 2009 that was rejected by Yelp. This sounds an awful lot like Groupon (stock IPO’d on Nov 7, 2011 and is down 22.41% to date). All things considered, Yelp touts itself as the only portal to provide reviews from everything from churches to strip clubs. That begs the question: who would publicly rate a church or strip club? (Source: Business Week, Google Finance)

The economy has been in turmoil over the last few years, but there is one industry that always does well…. Alcohol. Molson Coors Brewing Co’s stock rose faster than a shaken can of beer. There was a 58% increase in Q4 earnings. Net sales were up 12.2% to $937M and total volumes also increased 2.6% to a mind blowing 12.2 million hectoliters. Shares were up 5.24% for the year, trading at $45.43 and the market cap is $8.23B. The stock had been underperforming for a few quarters and the last quarter put all doubts to rest. Year over year profits are up $63.4M. It is also interesting to note that most of the growth has been in the high margin spirits and craft beers. As the labour markets improve in the US, Molson Coors expects revenues to increase further. Given the share price is around $45.43 and is trading well below the 52 week high of $49.43, I am confident that there is room for growth. When we factor in the fact that summer is around the corner, investing in Molson Coors seems like a good option. I would invest based on the fact that they have the most appropriate ticker name, TAP. (Source: Montreal Gazette)

Kellogg Co, is purchasing Proctor & Gamble’s Pringles unit. The purchase is essentially a leveraged buy-out as Kellogg is increasing its debt by $2B. Total long-term debt for Kellogg will increase by 38%. While increased debt is always cause for concern, it is apparent that borrowing rates will be at all-time lows for at least the next 2 years. As discussed in previous editions of Friday Finance Weekly the Feds have indicated that treasury rates won’t budge until 2014 at least. Shares of Kellogg shares are up 5.46% for the week and closed at $52.53/share (total market cap is $18.75B). Given that Kellogg is a strong player in the food sector, the Pringles acquisition is a great play. The total purchase price as $2.7B and it seems like the additional $700M will be a mix of new equity and existing cash resources ($460M on the balance sheet as of Dec 31, 2011). Experts estimate that the deal will be financed on a 10 year basis at a rate of 3.4%. The all-time strangest Pringle flavor was garlic seafood. Bet you can’t wait to reach into your cupboard to try some delicious garlic seafood flavored cereal. (Source: San Francisco Chronicle)

The U.S. Treasury Department’s inspector general for tax matters revealed in January that the IRS certified 331 prison inmates as registered “tax preparers” during a recent 12-month period, including 43 who were serving life sentences. None of the 43, and fewer than one-fourth of the total, disclosed that they were in prison. The agency blamed a 2009 federal law intended to encourage online filing of tax returns, noting that “tax preparer” registration can now be accomplished online by passing a 120-question test. USA Today reported in February 2011 that prisoners filing false or fraudulent tax returns scammed the IRS for nearly $39.1 million in 2009. I guess it doesn’t matter since they are already in jail right? Under tax law people are guilty until proven innocent, so this totally makes sense. (Source: USA Today)

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

Sam

Friday Finance Weekly 45TH Edition

Greetings folks and a warm welcome to the 45TH Edition of Friday Finance Weekly. I was going to elaborate on more Facebook news, but I decided to spare you the constant bombardment of useless information. Okay, maybe one piece of Facebook news. Mark Zuckerberg’s expected tax bill is $2B. Bet you won’t complain about taxes ever again. Wonder if Obama can revise the US deficit projections?

Buffet is a constant feature on my blog and he’s back with words of wisdom. According to Buffet investors should stay away from bonds as an investment class. Actually he has a valid point; inflation has increased while interest rates are at an all-time low. Small fluctuations in the inflation rate or exchange rate destroy the real returns of bond holders. From his letter to shareholders Buffet stated that “Current rates, [ ], do not come close to offsetting the purchasing-power risk that investors assume.” With the feds expected to keep interest rates at close to 0% until at least 2014, he has a good point. Buffet doesn’t stop there; he even goes on about gold, stating that its uses are limited and that it doesn’t have the potential of farmland or the ability to produce new wealth. Ouch, that’s got to hurt all the doomsday gold investors. Given that gold was less than $300 an ounce a decade ago, his comments are relevant. All things considered, for Valentine’s Day you should get your significant other a nicely wrapped piece of cow dung. When she looks surprised, tell her its more useful than gold. (Source: Bloomberg)

Canaccord is teaming up with a Chinese Bank (Import Export Bank of China) to create a $1B investment fund. The focus of the fund is to invest in Canadian resource companies. Canaccord’s shares are up 11.72% for the week and currently trade at $8.96/share. The total market cap is close to $750M. Given that Vancouver is the center of most resource activity in Canada, the newly announced Canada-China Natural Resource Fund will do most of its business here. From a strategic sense, I wonder if Canaccord will become a specialized natural resource only investment bank. This is clearly a step in that direction, but doing so will make the firm ride the waves of the volatile commodity market. It will be interesting to see how things pan out. Remember how the Harper Government blocked the sale of Potash Corp to a foreign buyer as it was deemed to be a strategic asset? That explanation never made sense at the time, but it seems like Harper has changed his mind. No, that’s not it, let’s face it. After Obama, kind of sort of maybe killed the XL Keystone Project (we really won’t know until the election is over), Canada has been making an effort to secure other trading partners. Aren’t you excited to see signs saying ‘Petro Canada, just kidding it’s actually Made in China’. (Source: Globe and Mail)

The US deficit has been in the news at it is shockingly more than expected. Well I have an idea, let’s start by doing something about the 7 things listed below:

  • $175,587 – Study on Cocaine and the Risky Sex Habits of Quail. How would you even put this on your resume? Better yet this project is expected to go well into 2015. Apparently the scientific community requires proof that drug use increase human sexual behavior. No way! Obviously humans and quail must have a lot in common.
  • $550,000 – Movie on how Rock ‘n’ Roll Helped Defeated Communism. Okay, this should be obvious, but I would watch it.
  • $592,527 – Proving that Feces Throwing is a Communication Skill of Chimps. Can’t even being to tell you how important this is?
  • $742,907 – Study on Sheep Grazing to Control Weeds. Sheep are being used as weed control for organic farming but since this has been done from the beginning of time we need to recertify this technique.
  • $765,828 – Pancakes of Yuppies. Government funds were used to finance a new International House of Pancakes in Washington, DC. This was supposed to be in an underserved community, but was opened next to a Best Buy and Target. Ironically this is being financed by the Department of Human Health and Services, which is also fighting obesity.
  • $17,800,000 – Gifts to China. Well they already buy all US bonds, so this it’s important to keep them happy.
  • $120,000,000 – Government Benefits for Dead People. In one example a son cashed his dead father’s checks for over 37 years. Wondering how he got caught? The son passed away and was no longer able to cash the checks.

This week I deviated from company specific commentary as most news was macroeconomic in nature. Have a fantastic weekend and my apologies that this came out late.

Many thanks,

Sam

Friday Finance Weekly 44TH Edition

Greetings folks and a warm welcome to the 44TH Edition of Friday Finance Weekly.

Looks like the job situation is finally on the mend in the US and markets were up sharply as a result of the news. The Dow Jones Industrial average closed at its highest level since May 2008 and the tech heavy, NASDAQ hit an 11 year high. More than 450 stocks hit their 52 week highs which includes heavy weights such as Apple, UPS, Yum Brands and MasterCard. In my opinion the NASDAQ will go higher as we get closer to the Facebook IPO. In total the US economy added 243,000 jobs and the unemployment rate reduced to 8.3%. Markets responded positively given the fact that the new jobs were broad-based in nature with a good proportion of them opening up in the manufacturing sector. That being said, critics will always have something to say…Madeline Janis, Los Angeles Alliance for a New Economy (I am thinking the same thing, what does that even mean?) rightfully stated that wages have been dropping despite the new jobs and implied that pulling US troops from Afghanistan is bad for the economy. Her rationale for is that the unemployment rate will increase further given the number of unemployed troops. The annual cost of maintaining the American presence in Afghanistan was $119B in 2011. Presently there are 92,000 troops in Afghanistan which works out to a cost per person of $1.3M. The average US staff sergeant with 6 years of experience makes $35K. So the remaining $1.265M goes to contractors, weapon producers and equipment manufacturers. That begs the question: is war a perverse subsidy for the economy? All things considered getting KFC in the middle of Kabul is more important than fixing the US government deficit so let’s not make a scene. (Source: LA Times, Reuters, Goarmy.com, NY Times, InfoPlease)

There are few firms that make bold predictions when it comes to the airline industry, but RBC has done exactly this. According to RBC Dominion Securities, both Air Canada and Westjet are set to outperform. This is despite economic uncertainty and the recent bankruptcy filing of the American Airlines parent company. Over the course of this week Air Canada is up 7.09% to $1.36/share (not a typo) and has a market cap of $377M. Westjet on the other hand is up 10.67% for the week and is presently trading at $13.59/share (total market cap is $1.88B). RBC has raised their 12 month projections of Air Canada to $2/share and Westjet to $16/share. According to RBC analyst Walter Sparcklin “We highlight this as a very attractive short-term trading opportunity.” If I was going to pick an Airline to put my money in, it would be Air Canada for sure. Westjet’s planes are now outdated and are not the preferred means of travel. In addition Air Canada’s Aeroplan loyalty program has a devoted following which continues to grow. Given that the summer months are around the corner this may very well be a good short (6 – 8 month) trading strategy. Let’s face it, at the rate airlines are charging for extra services they will soon be adding an oxygen consumption fee and limiting the free peanuts to one packet per passenger. At least if we own shares we will be able to take comfort knowing that holding our breath will result in higher returns for our investments. (Source: Globe and Mail).

For those that missed the Superbowl predictions last week:

Team Count Odds Whole Odds
NE 3083 0.6 : 1 3/5
NY 1917 1.6 : 1 13/8
     
AFC Win 3083 .6 : 1  
NFC Win 1917 1.6 : 1  
5000  
       
Implied Spread:  NE-5    

(Source: Mark Harrison – Sports Guru)

Looking for the world’s most expensive “I am a dumbass” look? Well Ed Hardy eat your heart out, there is now a $400,000 t-shirt. From the website “At Superlative Luxury we think that utter indulgence and decadence should in no way harm our beautiful environment. Due to recent advances in renewable energies and clothing manufacturing technologies it is now possible to drastically reduce the harmful levels of carbon dioxide which are usually produced during the manufacturing process. We have decided to champion this breakthrough by creating a one of a kind product- The Most Expensive T-Shirt In The World!” Have no fear, it’s not just a t-shirt; it comes encrusted with 16 certified diamonds. Forget getting a house or a Ferrari, this shirt is the next must have.(Source: CNBC)

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

Sam

Friday Finance Weekly 43RD Edition

Greetings folks and a warm welcome to the 43RD Edition of Friday Finance Weekly.

The much anticipated Facebook IPO looks like it is just around the corner and it appears that Morgan Stanley is going to be the lead underwriter. Reports indicate that the filing could happen as early as Wednesday next week. Valuation is a cool $75B – $100B and the IPO is expected to raise a total of $10B. Goldman was the frontrunner as they had arranged a $1.5B private offering for the company in January 2011, but due to an error on their end the investment was available to non-US investors only. The largest technology related IPO was Infineon Technologies which occurred in 2000 for a total of $5.9B. Google’s IPO was the 3rd highest internet IPO with $1.9B offering in 2004. There is an interesting link that illustrates internet stocks in a graphical manner: http://on.wsj.com/A0JyHO . With over 800M users worldwide the company is basically valuing each user at $125. While Facebook is a powerful social media force, it is apparent that they have lost touch with their users. Their new service, Timeline, is being forced onto users and this is cause for concern. To be frank I think Timeline is only going to benefit insurance companies, spying on their policy holders in order to catch them on technicalities. Regardless it will be interesting to see how profitable Facebook really is. I think Facebook is overvalued at this time and IPO investors will wish that that the Timeline function actually allowed time travel. (Source: Wall Street Journal)

There is less market uncertainty and this has caused the most economically sensitive stocks to make gains in 2012. Here is a list of 6 stocks from Morgan Stanley’s Cyclical Index that have gained the most:

  • Alcoa (AA) – This stock is up 20.12% for 2012. There is a growing consensus that the Asian economies are starting to increase manufacturing and this will drive the demand for aluminum. Share price is $10.38 and the market cap is $11B. The 52 week high was the stock was $18.47/share so there is still considerable room for growth.
  •  Sears (SHLD) – Total gain on a year-to-date basis is 38.47%. That’s not a typo, good old Sears is making a comeback. The share price is $43.93 and market cap is $4.07B. I am not entirely convinced that consumer spending is back at full force – and even if it was, Sears is no longer the number one destination for shoppers. I would put my money on Target or Wal-Mart.
  • Magna (MGA) – Increase of 23.53% for the year and the share price is $42.02. If you are bullish on the automotive market I would long both Alcoa and Magna. In addition the share is trading at the mid-point of its 52 week range, so I have a feeling there is still more life in this stock.
  • Masco (MAS) – This company sells home improvement/building products including faucets and windows. Year to date the stock is up 16.79%, but the share is trading close to its upper band. In addition there is still a glut of new homes in the US market. If you are looking for a short-term bump as people take on home improvement projects in the summer, this may be a good investment.
  • Freeport-McMoRan Copper & Gold Inc (FCX) – Total increase of 25.36% from the beginning of the year. Global demand is expected to increase and this will result in increased demand for manufacturing inputs, so this is a no-brainer.
  • Whirlpool (WHR) – The 14.82% increase in the share price is due to a reported increase in shipments. Again taking a bet on Whirlpool is a bet on the US housing market.

I know what you are thinking, wow that was boring and yes I love lists. Well we can all agree on one thing: the Sears catalog is only useful to people who use it instead of Charmin ultra and think that deer hunting should be an Olympic sport. (Source: The Street, Google Finance)

Super Bowl Sunday is next weekend and once again we have the odds. Alas last weekend we only call the New England win. If you are betting on the Super Bowl, here are our predictions:

Team Count Odds Whole Odds
NE 3083 .6 : 1 3/5
NY 1917 1.6 : 1 13/8
AFC Win 3083 .6 : 1
NFC Win 1917 1.6 : 1
5000
Implied Spread:  NE-5

(Source: Mark Harrison – Sports Guru)

Former 11-year-veteran police officer Louise McGarva, 35, filed a lawsuit recently, asking the equivalent of about $760,000, against the Lothian and Borders Police in Edinburgh, Scotland, for causing her post-traumatic stress disorder. Officer McGarva was attending a supposedly routine riot training session that got out of hand. She said she discovered that she had developed a debilitating fear of sirens and police cars. Obviously Louise hasn’t lived in downtown Vancouver. (Source: Edinburgh Evening News)

Have a fantastic weekend folks and please do not hesitate to forward this newsletter. Many thanks,

Sam

Friday Finance Weekly 42ND Edition

Greetings folks and a warm welcome to the 42ND Edition of Friday Finance Weekly. Let’s get right to business!

Everything has a cost and this week Mark Carney (Governor of Bank of Canada); put a price tag on the European banking crisis. In 2012, the uncertainty in the markets will translate to a $10B loss for the Canadian economy and this represents 0.6% of GDP. From a global stand point it is expected to cost around 1% of world GDP or $644B. The American economy is also being impacted to the tune of $116.6B (0.8% of GDP). I am not certain if this includes the increase in the cost of borrowing which may occur if the market decides to punish countries downgraded by the S&P. So far the bond markets have decided to ignore the S&P downgrades. The Bank of Canada further estimates that the Canadian economy won’t be dancing until the second half of 2013. Canadian companies did however have exceptional balance sheets and have resisted the urge to obtain unnecessary debt despite super low interest rates. Carney is also more optimistic than the World Bank as he expects the world economy to grow by 2.9% as opposed to 2.5%. Interesting facts,Canadarepresents approximately 2.5% of the world economy, yet on a total loss basis we absorb 1.6%. The Americans on the other hand represent 23% of the world economy and on a total loss basis they absorb 18%. So it appears that the European and Asian economies are absorbing a disproportionate amount of the loss. Nice, we don’t have to blame ourselves for this new mess. Alas it feels like Europe’s new power couple Sarkozy-Merkel just won the dance competition on the Titanic. You won, but you’re still going to sink. (Source: The Star, Chronicle and Google Finance)

General Electric (GE) announced better than expected Q4 earnings, despite revenues falling short of predictions. The company recorded an 11% gain in operating earnings, which translated to an EPS of $0.39. Total sales were $38B which was below the Wall Street estimate of $40B. The share price was steady throughout the day and was $19.15/share on close. For the week however shares are up 2.68% and the total market cap is $202B. Just to put this into context, GE has a larger market cap than the entire estimated loss of economic activity in theUSpertaining to a shakyEurope. GE Capital had a profit increase of 58% for Q4. This is a good sign as GE Capital is the world’s largest holder of commercial mortgages and the increase in profits may be a sign that the feared tsunami of commercial mortgage defaults may not precipitate. There may however be trouble for GE’s former sub-prime mortgage unit named WMC Mortgage Corp (are you wondering why they didn’t call it GE Mortgage Corp…most likely due to its unethical nature?). WMC is being investigated by the FBI and Justice Department for Fraud. They are accused of using complicated tactics such as falsifying paperwork and overstating income. I smell a conspiracy here. So WMC Mortgage Corp gave questionable loans to people that couldn’t afford them and GE Capital sold those mortgages in the bond market. This gave people the ability to lever themselves in order to purchase the newest GE appliances, the fridge that tweets, facebooks and emails you when the milk is out. (Source: LA Times, Forbes, Google Finance)

It’s a big football weekend and I am sure that Tebow’s knees are thanking him after his loss to the Patriots. Odds are as follows:

Conference Team Count Odds
AFC New England 1549 2.2:1
AFC Baltimore 931 4.4:1
NFC San Francisco 1805 1.8:1
NFC New York 715 6.0:1

So according to our predictions the Super Bowl is going to be New England vs.San Francisco. The AFC / NFC win is too close to call. (Source: Mark Harrison – Sports Guru)

From U.S. Sen. Tom Coburn’s periodic list of the most “unnecessary, duplicative and low-priority projects” that the federal government currently funds (announced in December): $75,000 to promote awareness of the role Michigan plays in producing Christmas trees and poinsettias; $48,700 for promoting the Hawaii Chocolate Festival; $113,227 for a video game preservation center in New York; and $764,825 to study something surely already done adequately by Silicon Valley entrepreneurs — how college students use mobile devices for social networking. Also on Sen. Coburn’s list: $15.3 million in continuing expenses for the famous Alaskan “bridge to nowhere” that was widely ridiculed in 2005 but apparently refuses to die. (Office of Sen. Tom Coburn)

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

Sam

Friday Finance Weekly 41ST Edition

Greetings folks and a warm welcome to the 41ST Edition of Friday Financing Weekly. It’s Friday the 13TH, so hope nothing crazy happens to you.

Wondering what one of the best investments of 2012 has been? You are not going to believe this, but it’s good old orange juice. Not only is orange juice full of vitamin C, it is also full of green. March orange juice futures shot up $20 or 11% to $207.75 on Tuesday as worries of colder temperatures in Florida and possible mold issues in Brazil caused investor commotion. This is the highest price orange juice has been since July 1977. Florida provides around 75% of the juice for the US and Canada. Frost is to blame for part of the price increase as it seems like Global Warming is hitting us where it hurts the most, our pockets. Brazil is the second largest producer of orange juice, but on Dec 28, the FDA got an anonymous tip that low levels of carbendazim (fungicide used to combat black spots (mold), that is banned in the US) was found on samples. Since December orange juice futures are up 40%! Finally figured out why orange juice containers have the word ‘concentrate’ on it. Wish I did! (Source: CBC)

Last year Apple faced a lot of criticism after factory workers started committing suicide. As a result they decided to conduct additional supplier responsibility reports and have released a list of suppliers for the first time. The list includes some big names in the industry such as Advanced Micro Devices Inc. (NYSE: AMD), Cypress Semiconductor Corp. (NASDAQ: CY), Broadcom Corp. (NASDAQ: BRCM), Fairchild Semiconductor International Inc. (NYSE: FCS), Flextronics International Ltd. (NASDAQ: FLEX), Jabil Circuit Inc. (NYSE: JBL), Vishay Intertechnology Inc. (NYSE: VSH), TriQuint Semiconductor Inc. (NASDAQ: TQNT), SanDisk Corp. (NASDAQ: SNDK), ON Semiconductor Corp. (NASDAQ: ONNN), and Qualcomm Inc. (NASDAQ: QCOM). If you can’t afford to pay $400 + per share for Apple, some of their suppliers may be a good bet. My money would be on AMD, Qualcomm and SanDisk. Apple shares barely moved this week and is presently at $419.97 a share and the market cap is $390B. An audit was conducted on 93 supplier facilities and more than half of their workers exceeded the 60-hr a week limit, 108 facilities did not pay proper overtime and there were reports of under-aged workers as well. You would think this would cause a significant issue for Chinese residents, but the exact opposite happened. An angry crowd pelted the Apple store in Beijing with eggs after Apple announced that they cancelled the sale of iPhone 4S’s. The cancellation was a result of the fear of there being excessive crowds. Seriously, is that a reason to riot! Excuse me while I listen to ‘Mo Money More Problems’ on my iPod/iPhone/iMac and forget about the world’s problems. (Source: 24/7 Wall Street, NY Times)

Friday Finance Weekly is back with sports playoff predictions and this time it is the NFL.

Conference Team Count Odds
AFC New England 919 4.4:1
AFC Baltimore 564 7.9:1
AFC Houston 294 16.0:1
AFC Denver 90 54.6:1
NFC Green Bay 1342 2.7:1
NFC San Francisco 753 5.6:1
NFC New Orleans 828 5.0:1
NFC New York 210 22.8:1

Conference odds:

  • AFC Win, Count 1867, 1.7:1
  • NFC Win, Count 3133, 0.6:1

Looks like Green Bay has the best odds at the moment. Given that Denver has a 54.6:1 odds of winning, if they win Tebow can actually claim that there was divine help. (Source: Mark Harrison – Sports Guru)

Not Ready for Prime Time: The unidentified eyeglass-wearing robber of an HSBC Bank in Long Island City, N.Y., in December fled empty-handed and was being sought. Armed with a pistol and impatient with a slow teller, the man fired a shot into the ceiling to emphasize his seriousness. However, according to a police report, the gunshot seemed to panic him as much as it did the others in the bank, and he immediately ran out the door and jumped into a waiting vehicle. I honestly think he was celebrating the New Year with a bang, it is New York after all. Give the guy a break. (Source: New York Daily News)

Have a fantastic week. Please don’t hesitate to forward this newsletter to your friends and family. Many thanks,

Sam

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Friday Finance Weekly 40TH Edition

Greetings folks and a warm welcome to the 40TH Edition of Friday Finance weekly. Happy New Year and may 2012 be a breakout year for you and yours. The Canucks are playing Boston tomorrow and I don’t think I will be able to sleep tonight.

Let’s start with some positive news and rundown the top 10 reasons stocks will rise in 2012, despite the doom and gloom predicted by some in the investment community:

  • The US is the best of the worst – The global economy is flirting with danger, but the world’s largest economy is doing better relative to other powerhouses in Europe. As George Feiger, CEO of Contago Capital Advisors put it; the US is the ‘least bad’ place to invest for a number of years. I am glad an MBA helped Mr. Feiger come up with such insightful commentary. His rationale is that the US is still center of innovation, has tremendous shale-gas resources and is still the market leader for raising venture funds. A CFA survey of economists indicated that the US economy will grow by 2% this year, just enough to avoid a recession.
  • A happy ending in Europe is possible – EU diplomats vigorously supported the Euro and have provided bailout funds when required, this is expected to continue into 2012 and as a result markets won’t be as spooked every-time a finance minister from a country in the EU sneezes. The most baffling comment regarding the EU came from Goldman Sachs Asset Management team, “Europe will still be called Europe”. For a few million dollars they will elaborate.
  • Stocks are priced well – Historically companies in the S&P 500 have been trading at 15x their estimated earnings and presently it is around 12.2x. US manufacturing is expected to continue its increase as it has done so for the past 26 consecutive months.
  • Corporate Earnings – Retail sales during the holidays were strong and combined with manufacturing we should see some positive quarterly earnings reports.
  • Election impacts – According to Citigroup, after analysis of stocks going back to 1900, the 4TH year of the presidential cycle is the second best for stocks. The S&P 500 posted average gains of 7.8% in election years. Are you wondering why…according to Citigroup, parties in power will focus on growing the economy and demonstrate prosperity in order to get re-elected. Translation, we are going to deal with our problems after we get elected; in the meantime please have a free ‘Yes We Can’ motivational DVD.
  • The housing and auto industries are dancing again – The American car companies are back in the black and housing starts in November were up 9.3%.
  • Uncertainties in 2011 wane – Had to include this to be true to the USA Today analysis, but shouldn’t this be obvious? I am guessing they only found 9 reasons and needed one more.
  • Statistics – Remember that class you hated? According to Sam Stovall, from S&P “the average gain for the S&P 500 in the six bull markets that lived to see their fourth birthday since World War II was 9.5%”. Too bad statisticians still don’t make sense. I believe the translation is that the S&P 500 has its best returns, 4 years after a severe downturn.
  • China is fine – There is a growing sentiment that China is in for a hard landing, but economists believe that the Asian economies are now fairly insulated from European demand decreases.
  • Nothing lasts forever – Okay, I lied, they actually only had 8 things and made 2 up. Basically the economic worries won’t cast a cloud forever and soon people will forget and move on.

There, you are 10 great reasons, actually 8 great reasons to take a 2ND, 3RD, 4TH mortgage on your house and invest everything in RIM. Honestly, I don’t see anything concrete here and I think we should stick with the cautiously optimistic mantra. (Source: USA Today)

A genius tried to pass a piece of U.S. currency in an amount not even close to being legal tender: a $1 million bill. (The largest denomination is $100.) Michael Fuller, 53, was arrested in Lexington, N.C., in November when a Walmart cashier turned him in after he attempted to buy electronics totaling $475.78 (apparently expecting change of $999,524.22). Everyone laughed at him, but I am curious as to what the note looked like http://bit.ly/zhzoSZ . (Source: CNET)

 

Have a fantastic weekend folks. Many thanks,

Sam

Friday Finance Weekly 39TH Edition

Greetings folks and a warm welcome to the 39TH Edition of Friday Finance Weekly. I was done for the year, but there is just too much going on. This is however the last edition of the year.

Everybody is making lists and checking them twice, but Canaccord Genuity has done something novel, by giving a list of what not to buy. Alas this list is limited to stocks and won’t help you make shopping mistakes this Christmas. The naughty list is as follows:

  • Intel – Supply disruptions have been blamed for a lowered Q4 guidance. Analysts predict that this will worsen for 2012 and that demand in general will be low for computer peripheral makers. On a year-to-date basis however Intel has done fairly well and the share price is up 15.88%. As of Friday close, the share price was $24.40 and the market cap was $124.24B. It is difficult for me to form an opinion on this either way, as Intel is in the process of releasing a new phone next year. With the legal troubles Android phones are facing from Apple, there may be a genuine need for a new phone in the market. That being said, Dell’s attempt to enter into this sector has been a disaster. The difference in this case is that Intel is an engineering company and Dell is primarily a consumer-focused electronic manufacturing company. Therefore in my opinion Intel will have a better chance in this segment. That being said do we really need another need another smartphone. Besides, Apple runs on Intel and they may have something to say about it.
  • LM Ericsson – In case you are wondering, yes this company has a joint-venture with Sony that focuses on consumer smartphones. Ericsson also makes telecommunication equipment for cellular companies. On a year to date basis the share has lost 13.53% of its value and is now trading at $9.97/share. Market cap is still at a healthy $32.63B. In my opinion, this company is going through a slow death and the writing on the wall indicates that Sony will divorce Ericsson in the near future. Sony is planning to release phones under their own brand name in the future. Hopefully the divorce between Sony and Ericsson doesn’t take as long as Mel and Robyn Gibson. That divorce took 2 years and after alcohol and Oksana were done with Mel, there wasn’t much left.
  • RIM – What? Are they still around. Share price has lost over 75% of its value this year. On Wednesday however there was significant speculation that RIM would be acquired by Amazon. In fact the shares rose 13% that day, but fell down fairly quickly as analysts revised their estimates to $8/share. I bet RIM is wishing they could have the $770M they spent on acquiring Nortel patents. An Amazon acquisition may not be a crazy idea, but I am sure they will make RIM sweat it out for a few more quarters.
  • Powerwave Technologies – Wireless equipment maker based out of California. I don’t know much about this company but it has lost over 83% of its value and now trades at $2.09. This is an easy one to pick.
  • Netflix – The company is at a cross road and lost significant goodwill with customers when they tried to separate the DVD rental business with streaming videos. Shares are down 58.67% for the year and presently trades at $72.62/share. Total market cap is $3.81B. In my opinion it is going to face long-term problems including bandwidth throttling and intense competition from Amazon/Apple. In 2012 look for Netflix to merge with a TimeWarner (Cable) type company. I think they should ditch the hamsters and pay some real actors. The bunny rabbit didn’t work for Blockbuster, so Netflix should take note.
  • Intuit – The company relies heavily on the small to medium business market and according to Canaccord there is reduced demand from this sector. In case you were wondering this company makes software to help business owners and individuals, including tax preparation. Shares are up 7.71% on a year to date basis and presently trade at $53.10. The market cap is $15.78B. I have mixed opinions on this company, but an interesting trading strategy will be to purchase the stock well before the tax season and sell it just prior to the earnings release.

According to Canaccord, technology in general will be depressed for 2012. While I agree with most of the recommendations above, it is hard to imagine how the impending IPO of Facebook isn’t going to lift the entire industry. Intel is still inside… EVERYTHING!  LM Ericsson is getting dumped. RIM is now featured in the latest mail order bride catalogue, Powerwave finally got in the news, Netflix needs to hire new actors and Intuit needs some serious branding.  (Source: Globe and Mail, Google Finance, Montreal Gazette)

Tis the season, so I found 5 facts about Christmas (yes I am obsessed with lists, wonder why?):

  • According to Facebook, 2 weeks before Christmas is the most popular times for couples to breakup. This just cracks me up. Wonder if they get together right after Christmas.
  • In the US there are around 20,000 ‘rent-a-Santa’s’ every year. They undergo yearlong training on how to be jolly without the influence of drugs and alcohol.
  • Christmas accounts for 1/6 purchases in the US.
  • The most popular song single ever is “White Christmas”
  • According to the United Nations Children’s Fund (UNICEF), there are 2,106 million children under age 18 in the world. If there are on average 2.5 children per household, Santa would have to make 842 million stops on Christmas Eve, traveling 221 million miles. To reach all stops, Santa would need to travel between houses in 2/10,000 second, which means he would need to accelerate 12.19 million miles (20.5 billion meters) per second on each stop. The force of this acceleration would reduce Santa to a red blob. Maybe he gets some help from the rent-a-Santa’s.

Well one thing is certain. The only way Santa can make all stops is to make a list and check it twice. It also gives me proof that most kids are naughty as Santa is in no shape to visit every house in less than a second. (Source: Random History).

Have a Merry Christmas and a Happy New Year. Please be safe over the holiday season.

Many thanks,

Sam