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 67TH Edition

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

Let’s start with some tech news:

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

News in the world of consumer goods:

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

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

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

Sam

Friday Finance Weekly 13TH Edition (Jun 24, 2011)

Greetings Folks and warm welcome to the 13TH Edition of Friday Finance Weekly.  The sun has decided to play hide and seek with us, but hopefully that will change soon.

Want to beat the stock market? Forget hiring a wealth manager; instead speak to your local US House of Representatives’ member. A study called “Abnormal Returns from the Common Stock Investments of Members of the U.S. House of Representatives” was conducted. The name of the study can use a serious facelift, but its findings are eye popping to say the least. In this study it was determined that members of the House of Representatives beat the market by an average of 6% a year. Senators on the other hand did even better and beat the market by 10%. It was determined that the trading occurred due to a substantial information advantage. Wondering how it works? Lawmakers in general are the first individuals to be informed of changes in macro policies. For example if the US government is removing a subsidy on ethanol, one can expect ethanol related stocks to drop. Shorting the stock based on this information can generate significant profits. Since this information is not company specific it is not considered insider information, so the SEC does not consider subject trading to be illegal. Ironically 2 Democrats have decided to introduce a new piece of legislation called the STOCK Act. It stands for Stop Trading on Congressional Knowledge Act. Too bad we can’t short the portfolios of congressional members if this bill passes. (Source: CNBC)

Rumors are swirling about the fate of RIM. They’ve taken a beating over the last month as their share price has decreased from $42/share to $28/share. The only real competitive advantage they relied on was BlackBerry Messenger and secure email solutions. Alas this is no longer an advantage as Apple and Google have developed superior user-friendly content on highly stable platforms. It has been suggested that RIM is ripe for a takeover and companies such as Apple, Cisco, Google, Microsoft, HP and IBM maybe suitable candidates. The price tag however is hefty and a buyer will have to fork out at least $20B net of RIM’s marketable assets. In my opinion RIM will probably become the next Nokia, “uninspiring yet profitable”. Going forward, it may be beneficial to scrap the BlackBerry Operating System and adopt a new platform like Android. With Android, RIM can focus on providing proprietary services like BlackBerry Messenger and continue to develop rugged looking phones. Jim Balsille I think it’s time to take a siesta and pursue your passion of acquiring an NHL Franchise. At least hockey won’t go out of style. (Source: National Post)

Each year, 24/7 Wall St creates a list of brands that will disappear. The 2012 all-stars are Sears, Sony Pictures, American Apparel, Nokia, Saab, A&W, Soap Opera Digest, Sony Ericsson, MySpace and Kellogg’s Corn Pops. Historically they’ve had a decent track record, having predicted the demise of Blockbuster and T-Mobile. On the contrary, they have been wrong about Kia, BP and Zales. My assessment for the 2012 all-stars is as follows:

  • Sears: Boring and stale. With Target gaining traction throughout North America, Sears needs to re-invent itself. That being said, their appliance business is one of the most profitable segments in retail.
  • Sony Pictures: Their latest movie is ‘Bad Teacher’, enough said.
  • American Apparel: Has been in bankruptcy protection for a number of months and their style sense is questionable to say the least.
  • Nokia: The recent strategic partnership with Microsoft is still crystallizing and may prove to be profitable in the long run. In addition, Nokia has a lock on the lower end cell phone market in the emerging economies of Asia and Africa.
  • Saab: Recently had to seek emergency financing to pay employees, which in my opinion is already a failure.
  • A&W: Sorry the Mama Burger and onion rings are never going out of style especially at 1AM.
  • Soap Opera Digest: Seriously, how did this ever get off the ground?
  • Sony Ericsson: The new Android devices seem top-notch and they have improved styles dramatically. In fact Sony Ericsson was the first company to use curved glass on a phone (not sure why that’s important, but sounds cool).
  • MySpace: Hasn’t been relevant for a long time.
  • Kellogg’s Corn Pops: Yes, let’s just stick to Corn Flakes.

Did you get paid today? Interestingly people are more likely to die on or shortly after the day they are paid. According to a study by Economist William Evans from the University of Notre Dame; when asked to explain this phenomenon Evans stated, “There is increased economic activity after payday. Some of the activity, like driving and trips to bars will naturally increase risk. Many types of activities are also known to trigger heart attacks.” Personally I think that heart attacks are caused by the lack of 0’s on our pay cheques. (Source: University of Notre Dame)

The non-existent summer this year, has compounded my seasonal affective disorder (SAD) which was the inspiration to my writing style this week. Rest assured I will be back to my usual upbeat self for next week.

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

Sam