Friday Finance Weekly 88th Edition

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

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

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

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

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

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

Many thanks,

Sam

Friday Finance Weekly 87th Edition

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

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

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

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

A quick retail snapshot:

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

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

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

Cheers,

Sam

Friday Finance Weekly 86th Edition

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

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

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

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

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

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

Sam

Friday Finance Weekly 85th Edition

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

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

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

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

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

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

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

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

Sam

Friday Finance Weekly 84TH Edition

Greetings folks and a warm welcome to the 84TH Edition of Friday Finance Weekly. Let’s get the party started right away.

The US is considering a number of tax reforms in order to address the $17 Trillion deficit and one of the most controversial measures is the Home Mortgage Interest Deduction (HMID). For the benefit of us Canadians, in the US, individuals are able to write off interest paid on their mortgages against personal income taxes to a cap of $1M a year. Let’s give a quick example of how this works. Assume that the monthly mortgage payment is $1,000, amount of that payment due to interest is $800 and 35% is the personal tax rate. So every month, an individual will get a tax credit of $280 ($800*0.35), so while the payment is $1,000 a month the effective cash payment is $720. The HMID provides $100B in tax savings for the American people. One would think that this write off is only for the primary residence, but you would be wrong. The write off is for secondary homes, vacation homes, etc. To add to that HMID mostly benefits households with $75K – $500K in revenue .The median US income is around $50K, so most American’s don’t see a benefit. There is fierce opposition from the National Association of Realtors and they intend to lobby against it. In my view the HMID is effectively a subsidy and thus should be eliminated. I thought the US was moving towards controlling real-estate bubbles and such subsidies inflate property prices.  Well at least for the foreseeable future investment bankers can iron 5 shirts on Sunday (you may have to think about that a bit). (Source: Market Oracle)

“Wow.” That summed up a few Twitter reactions to news that billionaire hedge-fund manager John Paulson’s gold fund has lost 65% year-to-date, after tumbling 23% last month. Losses for his PFR Gold Fund came on the heels of the Fed’s effort to prepare the markets last month for the eventuality of a paring-back on stimulus. Gold sank 23%-plus in the second quarter, the steepest quarterly loss since the start of modern trading in the 1970s. Buffet was never a believer in gold and I share that sentiment. Some experts believe that gold may fall to $900/ounce, but given the economic uncertainly it may not go that low.  (Source: Market Watch)

Going up against Apple’s iPhone 5S, Samsung’s Galaxy Note III, LG’s G2 and a handful of other flagship phones this fall isn’t going to be easy for the Moto X, the first Motorola smartphone that will be heavily influenced by Google. From the looks of things though, Google is covering nearly all the bases. The phone will feature more customization options than any other handset on the market, it will be built in the U.S., it will reportedly feature a nearly stock version of Android Jelly Bean, it will be packed to the gills with sensors and according to The Wall Street Journal, it will be supported by a $500 million marketing blitz. Google has had a good year so far as it is up 29.82% on a year-to-date basis. Not sure Samsung will feel about this. Time will tell, but as a consumer this is fantastic news. Now when I want to buy a phone I only have to spend 6 months researching it and by the time I pick one, new models will be out. I can repeat the cycle until my old phone stops working and I will forced to pick. This solves the annual ‘need to upgrade’ dilemma. (Source: Boy Genius Report)

Rappers keep taking about their wealth and most of the time its all BS. Pitbull for example states that he is a billionaire but in 2012 he made $9.5. On the other side of the equation, Dr. Dre states he’s worth millions, when net-worth is estimated at $350M.  This is all presented in a nice graph (no its not very scientific as it mixes network figures with income figures): http://buswk.co/13zhR6f (Source: Business Week)

About 1,000 hopeful borrowers overran a branch of China’s central bank as a rumor spread that it was handing out zero-interest loans, media said on Thursday, illustrating how Chinese financial know-how badly lags growth in banking products. Police were called in on Tuesday to disperse the crowd, which had gathered for days outside the central bank in Beihai in the southern province of Guangxi, the Global Times said. The rumor had spread that the People’s Bank of China was distributing interest-free loans of between 50,000 yuan ($8,200) and 500,000 yuan. I bet the Chinese saw a Bank of America commercial and got confused. (Source: Reuters)

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

Sam

Friday Finance Weekly 83RD Edition

Greetings folks and a warm welcome to the 83RD Edition of Friday Finance Weekly. My apologies for tardy state of this newsletter. I am switching to a new system over the next several weeks and this will ensure timely delivery of spicy finance news.

Zero Hedge recently wrote an article on 19 reasons to be deeply concerned about the Global Economy. Here is my top five:

  • Velocity of money in the US has plunged to an all-time low. Basically money is not flowing through the system and banks aren’t lending. If the velocity has slowed down due to increased credit standards that makes sense, but I think banks are hoarding cash to improve balance sheets. Both factors aren’t necessarily bad, but nothing will happen if both the chicken and the egg are stagnant. That being said, I hope the government doesn’t try to kick start things.
  • Fall of the Egyptian government will result in increased instability and a spike in oil prices. This is especially problematic as summer travel results in increased oil consumption. One has to wonder if oil traders are secretly funding instability movements in the Middle East. Okay that was my one Snowden moment of the day.
  • The European debt crisis is going to come in our radar again. The Portuguese Finance and Foreign Ministers quit within two days. Also it is expected that Italy will need another bailout within six months. Hey at least Berlusconi won’t party with the extra dough.
  • PIMCO the bond trading heavy weight is starting to see massive capital pullouts. In June, investors pulled out $9.6B in capital. It is the largest single outflow since 1993. That being said, it could be that more capital is flowing from debt to the equity market, which is considered to be a good sign. This is a ‘meh’ sign at best.
  • Perhaps the most troubling sign is that the percentage of companies providing negative earnings guidance for this quarter is at a level never seen before. Even Samsung was on this boat.

To sum up, all is not well, but summer is here and the beer is cold. I wouldn’t bother with the rest of the list as it’s a bit repetitive. (Source: Zero Hedge)

Six years in the making, Adidas is launching a radically new running shoe, the “Springblade,” on August 1.  The shoe has 16 “blades” extending from the sole, each one composed of a transparent, highly elastic polymer that is intended to return energy forward with each step. Springblade is aimed at those who don’t identify themselves as runners, specifically high school and college athletes who run as a means of conditioning for sport. Adidas themselves is in a much-needed boost in the running department. According to SportsOneSource, Adidas suffered a decline in running sales in the month of May while five other companies, including category leader Nike, recorded gains of at least 20 percent. If you are interested in check it out please click the following: http://bit.ly/1a8pLVy  While this shoe is revolutionary in every way, it has a small problem. Mud has a tendency of getting stuck in it. Thought that would have been a design requirement. (Source: USA Today)

In 2011, Nordstrom’s spent $270 million to buy HauteLook, which sells clothes to members in “flash sales,” online offers that expire within hours. Now, the Company is expanding its online presence through its investment in online specialty gift retailer, Wantful. The companies recently launched a joint platform, which works like this: after users enter some information about who they are buying for and how much they would like to spend, the company sends the gift recipient a customized catalogue of up to 12 potential items to select from. Nordstrom’s investment essentially functions as an inexpensive means for research and development, as the retailer strives to further grow its e-commerce business, which currently represents 11% of total revenue. Nordstrom has always been smart and continues to innovate. That being said this is a company that thrives on providing superior customer service. I am not sure how this will translate in the online space. (Source: Business Week)

Congress established the Interagency Working Group in 2009 to set guidelines on advertising healthy foods to children, and public comments on the guidelines are now being posted. General Mills appeared among the most alarmed by the IWG proposals, according to its comments on the Federal Trade Commission website (as disclosed by Scientific American in May). Of the 100 most commonly consumed foods and beverages in America, GM asserted, 88 would fail the IWG standards, and if everyone in America started following the health recommendations, General Mills asserts that the cost of feeding the entire nation would increase $503 billion per year. No worries, let’s just add it to the national debt. I wonder however if health care costs would decrease in such a case. (Source: Scientific America)

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

Sam

Friday Finance Weekly 82ND Edition

Greetings folks and a warm welcome to the 82ND Edition of Friday Finance Weekly.

For this week, I want to try a new format and give you a quick dose of the most important finance news (3 positive and 3 negative). This is a summary from the Zero Hedge website, so I can’t take too much credit for it.

  • Positives –
    • Yahoo acquired Tumblr for $1.1B. Not sure if this is a good idea, Yahoo’s shares are flat for a week (0.72% decrease). Honestly I still don’t know what Tumblr does.
    • Average new home prices soar, unfortunately real income does not. I guess this is bitter sweet, loss of income is offset by increase in home values. Wait, there is no way this has happened before right?
    • Foreign banks have plenty of cash (thanks to the Fed). Basically the Fed is also supporting foreign banks operating in the US by depositing their cash. Translation you can bank anywhere.
    • Negatives –
      • Target misses Q1 significantly, YoY Revenue down $199MM, YoY EPS down $.27. This will change with their entry to Canada and the crazy new ‘Nice to meet you, neighbor’ campaign.
      • Student loan delinquency continues to climb. Here’s a though: maybe they should just make school cheaper.
      • Apple meets the “Fairness Doctorine”, as offshore cash gets scrutinized. Basically the IRS will take an opinion on whether the taxes paid were fair. Given their mountain of cash, I am sure Apple can bury the IRS with paperwork, but this will be precedent setting nevertheless.

(Source: Zero Hedge)

Google Inc. launched a paid streaming music service in the United States that will compete with the likes of Pandora and Spotify.  Google Play Music All Access will cost $9.99 per month, though the search advertising giant was offering 30-day free trials and a $7.99 monthly fee for those consumers who sign up before June 30. Consumers can access the service via Android mobile devices and PCs. The announcement came at Google’s annual developer conference in San Francisco.  As of Jan. 31, Pandora had 65.6 million active users-those who had accessed a Pandora account within the last 30 days-according to its annual report.  Spotify is a private company that claims 6 million paying subscribers and more than 24 million active users. Overall it’s a smart move by Google, but I wonder if they are too late to the game. Apple, for example, still hasn’t launched this service but while most think that this is due to negotiation issues with the labels – it just may not be that profitable. Streaming services need a point of differentiation and so far nothing comes close to a truly social music experience. (Source: Internet Retailer)

Approval rates on business loans from big banks (those with over $10 billion in assets) have improved dramatically over the past year, according to the Small Business Lending Index from Biz2Credit.  The index, which has been tracking bank approval rates since January 2011, compiles data from companies applying for loans from $25,000 to $3 million.  The index shows that big bank approval leapt in September 2012, and since then it has been steadily increasing. In April, big bank approval rates for small business loans reached a record high, peaking at 16.8%. In a year-to-year comparison, approvals at big banks are up over 50%. This is truly a positive sign as small business is where you see overall economic improvement and serious impacts on unemployment. That being said, I hope small business lending isn’t up because of government influence. If that was the case the underwriting standards would be impacts and write-offs would precipitate.  I guess it doesn’t matter, since the government will fund banking losses. (Source: The Financial Brand)

Okay, I rarely put links in this blog, but you have to check this out:

http://wapo.st/10YEXM8

Its title is, ‘These 31 charts will destroy your faith in humanity’. Topics include, trends by armed conflict type, human slavery, and some hilarious ones such as water consumption during showers. (Source: Washington Post)

Eliel Santos fishes the grates of New York City seven days a week, reeling in enough bounty to sustain him for the last eight years, he told the New York Post in April. The “fishing line” Santos, 38, uses is dental floss, with electrician’s tape and Blue-Touch mouse glue — equipment that “he controls with the precision of an archer,” the Post reported. His biggest catch ever was a $1,800 (pawned value) gold and diamond bracelet, but the most popular current items are iPhones, which texting-on-the-move pedestrians apparently have trouble hanging onto. Okay so since this is essentially a donation, people who have their stuff found by Santos should be eligible for a tax receipt, right? (Source: New York Post)

Have a fantastic weekend and for my American friends I hope you have a good long weekend. Don’t hesitate to forward this newsletter. Many thanks,

Sam

Friday Finance Weekly 81ST Edition

Greetings folks and a warm welcome to the 81ST Edition of Friday Finance Weekly. This weekend is supposed to be a scorcher…so enjoy! Go Canucks Go!

The bond markets are active in a big way. Both Nike and Apple issued huge bond offerings. Nike boosted the industry’s biggest cash hoard by entering the bond market for the first time in a decade, with a new $1 billion offering.  The athletic-footwear maker sold equal $500 million portions of 2.25 percent, 10-year debt and 30-year securities with a 3.625 percent coupon which is the lowest among similar corporate bonds issued in the U.S. this year (Bloomberg). The 2023 notes yield 58 basis points more than Treasuries, with the 2043 bonds paying a spread of 75. Nike’s sale adds to the $4 billion of cash and marketable securities the company had on Feb. 28 (Bloomberg). This is telling about the bond pricing, the markets are essentially saying that Nike is only marginally riskier than the US government. Proceeds are mainly for capital expenditures and acquisitions. The key word is acquisitions. Let’s see what they get up to. Apple somewhat dwarfed Nike, by issuing $17B in bonds. This is partly to quell investor demands of share buybacks or dividends. That being said, by issuing debt as opposed to repatriating its foreign cash reserve, Apple is expected to save $9.2B in taxes. Brilliant to say the least. Apple’s new iOS 7 is due out in September and if the past is any indication, they will continue to add piles of cash. I honestly think that the US government should borrow funds directly from the private sector. That’s a novel balance your budget strategy; unless of course the BC NDP has already proposed that. (Source: Bloomberg, CNET)

Some positive and negative news coming out of the states these days: The US debt ceiling deadline (yes it’s an actual thing now) has been pushed to mid-September. Previously it was set for August. The government boosted its total revenues as the economy has improved and there have been changes to the tax policy (basically gone up). Whew, those Washington politicians can now take a well-deserved summer break.  Perhaps they will contemplate creative ways of filibustering; reading the dictionary will no longer cut it. Now for the bad news: The richest Americans got richer during the first two years of the economic recovery while average net worth declined for 93% of the nation’s households (PewResearchCenter).  The Pew report says wealth held by the richest 7% of households rose 28% from 2009 through 2011, while the net worth of the other 93% of households dropped 4%.  Pew says the main reason for the widening gap is that affluent households have stocks and other financial holdings that increased in value, while the less wealthy have their homes as their main asset, which haven’t fully regained their value since the housing downturn. Interesting how they make no mention of new debt. (Source: Bloomberg, USA Today)

Monster Beverage Corp. has asked a federal court to halt efforts by San Francisco City Attorney Dennis Herrera to place restrictions on its popular energy drinks, arguing such regulations are a federal matter. In a lawsuit filed Monday in U.S. District Court in Riverside, Calif., Monster said the San Francisco city attorney’s office was acting illegally by trying to force it to cap serving sizes and limit marketing, among other curbs. The Corona, Calif.-based company is the leading seller of energy drinks in the U.S. based on volume. The move comes amid heightened scrutiny of energy drinks, which promise a lift from caffeine and ingredients such as taurine and ginseng but have raised safety concerns among public-health officials. Shares for the company are up 2.03% for the week and 9.39% for the year. Smart move by the energy companies, but this is reminiscent of actions taken by cigarette companies. I have a solution that will fix things. How about a health tax on food products considered bad for you? There is a tobacco tax, so why not apply it to fast good. The monies can be used to fund increased health care related expenses. Or perhaps start putting pictures of angry, testosterone fueled teenagers on monster energy cans. (Source: Wall St Journal)

Wealthy Russians have recently found a way around the country’s horrid traffic jams: fake ambulances, outfitted with plush interiors for relaxation while specially trained drivers use unauthorized lights and sirens to maneuver through cluttered streets. London’s Daily Telegraph reported in March that “ambulance” companies charge the equivalent of about $200 an hour for these taxis. (Source: Daily Telegraph)

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

Sam

Friday Finance Weekly 80TH Edition

Greetings folks and warm welcome to the 80TH Edition of Friday Finance Weekly. My apologies for last week as I decided to talk a day off.

Clothing seller Gap Inc. said that it plans to start to franchise Old Navy stores in international markets in 2014, part of its plan to add business at home and globally.  “There is meaningful opportunity for our diverse portfolio of brands to gain share in the $1.4 trillion global apparel market,” said Gap CEO Glenn Murphy in a statement. The news comes as Gap presents its future goals at its 2013 investor meeting in San Francisco.  The company, which operates 3,100 company stores under the Gap, Banana Republic, Old Navy, Piperlime, Athleta and Intermix brands, did not specify how many stores it plans on franchising.  It also said it is looking into the possibility of opening company-owned Banana Republic and Gap stores in China.  In North America, the company said it plans to focus on expanding its smaller brands, athletic gear Athleta, e-commerce site PiperLime and boutique Intermix.  After having a few mediocre years, looks like The GAP is getting its grove back. Its shares are up 20.75% on a year to date basis and presently trade at $37.48/share. Franchising is a fantastic way to expand especially as the capital cost is limited. Let’s see if they can maintain their brand integrity. Given their price point let’s hope nobody try to make Old Navy knock offs. (Source: Business Week)

McDonald’s revealed a weaker-than-expected first-quarter profit as sales at its more established stores slumped across its geographic markets amid a still turbulent economy.  The Oak Brook, Ill.-based fast-food company reported net income of $1.27 billion, or $1.26 a share, compared with a year-earlier profit of $1.26 billion, or $1.23 a share.  Revenue for the three months ended March 31 was $6.6 billion, up 1% from $6.55 billion a year ago, edging just above the Street’s view of $6.59 billion. However, same-store sales, a key growth metric for sales at stores open longer than a year, slumped 1.2%.  McDonald’s continues to update its menu with health options to make it more relevant to today’s society.  It will be interesting to see if the McCafe concept is actually working. I would think that the switch to higher margin products would be boom for the company, but perhaps the target client doesn’t sip lattes. Regardless I wouldn’t read into this too much and the market seems to have agreed as the stock price has remained relatively flat (increase of 0.88%). Summer is generally good for fast food as more people eat on the go. (Source: Washington Post)

Dish Network has proposed a $25.5 billion merger with Sprint Nextel, exceeding the bid by Japan’s Softbank to buy the cellular carrier.  Satellite-TV provider Dish hasn’t formally withdrawn its offer to purchase cellular carrier Clearwire, which is majority-owned by Sprint but not controlled by Sprint. Dish said its offer for Sprint is not contingent on Sprint succeeding in its current bid to purchase the remaining Clearwire shares that it doesn’t own.  The merger would reduce joint costs by $1.3 billion in the first year and by $1.8 billion in three years, thanks in part to lower acquisition costs and other synergies, the company said.  The merged company would use Dish’s 700MHz spectrum to deliver Dish programming in a one-to-many setup to mobile devices.  The proposal would not be subject to a government review that foreign-owned SoftBank’s proposal is.  Dish, however, needs to raise an additional $9.3 billion to pay for the merger. This deal is a near certainty and as a result I would be bullish on this stop. This week Sprint was relatively flat on the markets. I doubt Softbank will increase their offer especially in light of the fact that the US government my squash it. Given Dish’s diversified income base it will be a real competitor to AT&T and Verizon. (Source: New Bay Media)

The economic theory underpinning austerity policies being followed by governments worldwide may be flawed.  That is the allegation made in a study by the University of Massachusetts. It claims to have found coding errors on the Excel spreadsheet used by the academics who produced the theory which could invalidate their conclusions.  It was economists Kenneth Rogoff and Carmen Reinhart who found that economic growth normally slows when a government’s debt exceeds 90 percent of the country’s annual economic output.  The observation and the subsequent conclusion that countries must cut public spending has meant hardship for millions. Hope nobody in Greece or Cyprus reads this. Regardless, maybe they were using the wrong version of Excel. (Source: Euronews)

In March, Washington state Rep. Ed Orcutt, apparently upset that bicyclists use the state’s roads without paying the state gasoline tax for highway maintenance, proposed a 5 percent tax on bicycles that cost more than $500, pointing out that bicyclists impose environmental costs as well. Since carbon dioxide is a major greenhouse gas, he wrote one constituent (and reported in the Huffington Post in March), bike riders’ “increased heart rate and respiration” over car drivers creates additional pollution. Damn, so do start taxing the gyms as well? (Source: Huffington Post)

Have a fantastic weekend folks. Too bad the rains are returning. Please don’t hesitate to forward this email. Many thanks,

Sam

Friday Finance Weekly 79TH Edition

Greetings folks and a warm welcome to the 79TH Edition of Friday Finance Weekly. Look at that, two editions in a row. Hope the rain isn’t getting everyone down.

Revised takeover offers for Australia’s Billabong International Ltd. have come in considerably lower than indicative bids, with the highest offer valuing the struggling surfwear firm at only A$287 million ($300 million), the Australian Financial Review reported.  A consortium comprising Billabong’s former U.S. boss Paul Naude and private equity firm Sycamore Partners has put forward an offer of about A$0.60 per share, while a rival group made up of private equity firm Altamont Capital Partners and U.S. clothing group VF Corp has offered less than A$0.50 per share, it said.  The offers are below Billabong’s share price at its last close on March 28 of A$0.73 and around half the A$1.10 initial indicative bids from both consortiums, which valued the company at A$527 million ($550 million).  Since the initial offers, Billabong has posted a first-half net loss of A$536.6 million and lowered its full-year guidance, citing difficult trading conditions in Europe and a disappointing performance from its Nixon watch brand.  In February 2012, Billabong rejected an A$850 million offer from TPG Capital TPG.UL as too low. Makes you wonder what Billabong was smoking (sorry I couldn’t resist). What’s next is they will evaluate their options through a liquidation scenario and make decision. Its Déjà vu – remember Groupon and Google? (Source: Reuters)

A day after the sudden exit of Lululemon’s chief product officer, the yoga-pants maker that continues to reel from the massive “sheer” pants recall last month was slapped with a downgrade to “sector perform” by RBC Capital Markets.  RBC analyst Howard Tubin said the departure of Sheree Waterson brings a “new level of uncertainty to the Lululemon story.  It is Ms. Waterson’s departure that is the impetus for our downgrade,” he said in a note to clients. The downgrade was from “outperform.”  Tubin goes on to note that Waterson has been a “strong creative asset” to the women’s sports apparel maker since she joined the company in 2008 and has been “instrumental in the design process.”  While I agree with RBC on this, the market seems to have brushed this aside as the share is up 8.19% for the week and is currently traded at $69.60. I think they should have used the sheer pants as a marketing opportunity. Perhaps launch a new line for professional.. eh.. dancers? (Source: Google Finance, Fox Business)

Toys ‘R’ Us has withdrawn its plans to go public in a move that was considered likely since its chief executive officer Gerald Storch announced plans to step down in February.  In its SEC filing, the retailer stated it was pulling its initial public offering, which was first registered in May 2010, because of unfavorable market conditions and a recent management change.  Storch stepped down in February, although he will remain as chairman, and the company has begun a search for his replacement.  The decision to withdraw the IPO came at the same time that Toys ‘R’ Us released its fourth-quarter results, which were below the previous year.  Net sales were $5.8 billion for the fourth quarter, a decrease of $155 million compared to the prior year, and net earnings were $239 million, compared to $343 million in the fourth quarter of 2011, a decrease of 30 percent. I am however curious as to know if the sales are down due to changing demographics (ie less children as our population is aging) or the lukewarm economy. Regardless, the future of entertainment is in interactive media. (Source: License Magazine)

The uber popular cross platform messaging app, Whatsapp we being courted by Google. Reports indicate that Google made a $1B offer for Whatsapp. Unfortunately they rebuffed the offer. Whatsapp currently has 250M users and the majority of users are free. They earn around $100M in total revenues annually, so Google was offering 10x revenue (a fair price). As the user base increases the infrastructure requirements will continue to increase and I am not sure if Whatsapp can cope (from a cost perspective). Google is in the best position to assist. Let’s see what the future holds. (Source: Guardian)

In March, Microsoft was fined 561 million euros (about $725 million) by the European Commission after, apparently, a programmer carelessly left out just one line of code in Microsoft’s Service Pack 1 of European versions of Windows 7. That one line would have triggered the system to offer web browsers other than Microsoft’s own Internet Explorer, which Microsoft had agreed to include to settle charges that it was monopolizing the web-browser business. Also in March, the government of Denmark said that Microsoft owed the country about a billion dollars in unpaid taxes when it took over a Danish company and tried to route its taxes through notorious tax havens such as Bermuda. According to a March Reuters report, Denmark is among the first European countries to challenge such U.S.-standard tax shenanigans and is expecting payment in full. The market doesn’t really seem to care as the shares have been stable over the last month (increase of 3%). But seriously, how did someone forget something so important? I guess this gets chalked up with history’s costliest oh crap moments. (Source: Guardian)

According to news reports in November, New York City physician Jack Berdy was doing a brisk business administering Botox injections (at up to $800) to poker players who were hoping to prevent facial expressions that might tip their hands. Accountants: This would qualify as a legitimate business expense right? (Source: Fox News)

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

Sam