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