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 76TH Edition

Greetings folks and a warm welcome to the 76TH Edition of Friday Finance Weekly. Hope your Christmas shopping is going well and that you are gearing up for the holidays.

Let’s expand on the economy and get a pulse for what’s happening:

  • The rate of student loan debt delinquency has leaped above the delinquency rate for all other consumer debt including those of cars and credit cards, according to a study done by the Federal Reserve Bank of New York.  Student debt in the U.S. is now at $956 B, which is an increase of $42 B since last quarter. That means 11 % of student loans are 90 days delinquent. In fact student loans are the only consumer debt category this is currently growing. Is it that school is too expensive or is the problem really the lack of good jobs? Well the good news is that there is a solution, default on your debt and after seven years its record gets wiped out. (Source: Deseret News)
  • Following up on my employment comments there is some good news coming out of the states. The unemployment in the US fell to 7.7%, the lowest since December 2008. During the month of November a total of 146,000 jobs were added and the forecast was 85,000. Unfortunately increased levels of employment didn’t translate to increased consumer confidence as the University of Michigan consumer sentiment index fell to 74.5, down from 82.7. Canada added 59,300 jobs and the unemployment rate fell to 7.2%, down from 7.4% in October. I am however skeptical about reading too much into the jobs report during November/December as retailers tend to hire temporary staff for the holiday season. Santa’s helpers for example are unemployed all year except for the month of December (okay I tried). (Source: Globe and Mail)
  • Also there is a lot of fiscal cliff talks and let me give a worst case scenario summary. On Dec 31 a number of laws are due to expire, unless the president and congress can work something out. If nothing is resolved then things get interesting. Taxes would go up for almost every taxpayer and many businesses. The Bush-era tax cuts, which tax relief for middle and upper-class tax payers, would be a thing of the past.  So would President Obama’s payroll tax cut which added about a thousand dollars a year to the average worker’s income. Government spending would be slashed.  That means less money for most military, domestic and federal programs.  $26B in emergency unemployment-compensation would be gone. Medicare payments to doctors would be reduced by $11B. Federal programs would take the biggest hit.  They stand to lose a total of $65B. No big deal right? So why aren’t the republicans getting serious? (Source: Yahoo Finance)

Retail therapy, as if you weren’t sick of shopping:

  • Online spending rose 17% after Thanksgiving, one of the busiest days of the year for Internet retailers, as tablets and smartphones let customers shop anytime and anywhere.  Consumers spent about $1.46B on so-called Cyber Monday, compared with $1.25B a year ago, making it the heaviest online spending day in history, research firm ComScore Inc.  said in a statement. U.S. retail e-commerce spending reached $16.4B in the first 26 days of the holiday season, a 16% increase from the same time last year.  The convenience offered by mobile devices, especially tablets, is boosting sales for online retailers such as Amazon.com Inc. and EBay Inc. Consumers are no longer waiting for Black Friday to shop and they’re starting as early as Thursday evening, which will help Internet sales reach $43.4B this holiday season, or 10% of U.S. retail spending, excluding gas, food and cars, according to ComScore. During this time of the year the only exercise most people get is fighting the crowds in malls, so with online shopping we can add to our obesity problem. Quick buy health care stocks. (Source: Bloomberg Business Week)
  • Daily deals company LivingSocial is getting more antisocial by the day. The Groupon competitor said it was laying off 400 people, or almost 9 percent of its staff, because of falling demand for its services.  LivingSocial isn’t the only one in its nascent industry to face pressure. Groupon’s board of directors is reportedly considering whether to fire CEO Andrew Mason, who effectively admitted this week that his performance merits scrutiny. The company’s directors appear to have decided to let him stay, at least for now.  Indeed, only a few years into its existence, the entire online coupon business is struggling, with top players still trying to learn how to grow quickly and profitably enough to satisfy investors. The question is not how much more consolidation can go on so much as how many companies might be left to consolidate. According to trade publisher Daily Deal Media, in the last six months of 2011 alone nearly 800 daily deal companies closed their doors. Hey maybe its time Groupon gave a coupon for its shares? Its got to be at least 50% – 60% off. (Source: CBS Money Watch)

Among the federally funded projects highlighted in the “2012 Waste Book” of U.S. Sen. Tom Coburn were a $325,000 grant to develop a “robosquirrel” (to help study the somehow-confusing interaction between squirrels and rattlesnakes) and a $700,000 grant by the National Science Foundation for a New York theater company to create a musical about climate change and biodiversity (which actually opened this year, in Kansas City, and included among its concepts, according to one critic, “flying monkey poop”). Abuses of the food stamp program were also detailed, such as by one exotic dancer who, while earning $85,000, drew food stamps in an amount roughly equivalent to the sum she spent on “cosmetic enhancements.” Now the only thing that would make this story better would be if the exotic dancer was part of the musical. (Source: Fox ‘News’)

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

Sam

Friday Finance Weekly 68TH Edition

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

Let’s start with the economy:

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

Let’s get some retail action:

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

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

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

Sam

Friday Finance Weekly 63RD Edition

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

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

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

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

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

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

Friday Finance Weekly 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 26TH Edition (Sep 23, 2011)

Greetings folks and a warm welcome to the 26TH Edition of Friday Finance Weekly. Surprise, surprise the markets are acting in an erratic manner yet again. But at least the weekend is around the corner.

Apple’s share price had a spike mid-week as rumors swirled about the iPhone 5 being released in early October. The overall market sentimental dampened this spike as the share price is up marginally by 1.13% to $404.73/share (for the week). The latest rumor was confirmed by Al Gore (that’s not a typo). Wondering, how Al Gore fits into the picture, he sits on the Apple board and is a sustainability advisor. Curious as to where Apple ranks on the Sustainable Performance Value rating? Out of all the major tech companies Apple ranks 101 (yes that’s right), yet is the most valuable company in terms of market cap. Al Gore, obviously was on vacation for the last several years. Financial analysts are already stating that demand for iPhone 5 will be ‘unprecedented’. A survey by RBC Capital Markets indicated that 31% of all respondents were very likely or somewhat likely to purchase the new iPhone 5. This same poll was conducted prior to the launch of the iPhone 4 and it was at 25%. In addition there is the possibility of the iPhone 5 coming to Sprint and T-Mobile in the states, thus greatly increasing marketing share. A total of 12.5M units are expected to be sold in the last quarter of 2011. Malls around North America are bracing for the hordes of people that will be lining up for weeks and weeks to add to Apple’s ever expanding cash pile. Al Gore will be doing his part to raise awareness on environmental issues by setting up kiosks and selling DVD’s to his blockbuster movie, ‘An Inconvenient Truth’. (Source: RBC Capital Markets, FOREX, CNET)

Wondering what’s going on in the equity markets? Honestly most experts are divided, but here are a few reasons:

  • Most people predicted that US house prices bottomed out in 2010, but for the last 12 months through July 2011 prices have dropped 3.3% according to the Federal Housing Finance Agency. The fact that unemployment has now stayed above 9% for two years in a row is eroding consumer confidence when making large capital purchases. In fact over the last 5 years, US residential real-estate values have declined by $6.6T, or around 18% on a national level.
  • Copper, coal and other industrial inputs (zinc, iron ore, lead, aluminum, tungsten and oil) are considered to be leading economic indicators and so far they are painting a grim picture. Copper futures for example have dropped by 21% (COMEX) on a year to date basis. Copper is said to lead manufacturing output by six to 12 months and with a sharp decline in its futures one can conclude that large capital intensive projects are on the backburner. Coal (loss of 5.6%), aluminum (down 6.6%), lead (loss of 11.6%) and zinc (down 14.5%) have also suffered on a year-to-date basis.

All is not lost however as the world population growth has caused corn future to be up by 3% and rough rice (no idea what rough rice is) is up 19%. While all the articles I’ve read have termed it as population ‘growth’, I am confident that its obesity in action. Just kidding, countries like India are getting more affluent thereby increasing the overall demand for food. Looks like Al Gore has found a secret weapon in his fight to save the planet, the recession. (Source: Wall Street Journal, Wall Street Cheat Sheet)

The American retail giant Target (NYSE: TGT) is giving us a peek of their plans. This week they announced that official market entry will start in 2013 and they plan to open between 125 – 135 stores throughout Canada. While this is a fairly ambitious goal, most of the stores are going to be retrofitted old Zellers stores, so construction time will be minimal. Groceries are to be supplied by Sobeys Canada, under a private label program. Taking a long position on Sobeys would have been a wise investment choice, but unfortunately they are privately held. Canadian expansion news hasn’t however been able to lift the Target share price as it is down by 6.72% this week. Presently the share price is just under the $50/share mark and the total market cap is $33B. On a side note, wondering why there are no Wal-Mart’s in Afghanistan? Because they are all Targets. (this joke needs a bit of work). (Source: Yahoo Finance, Google Finance)

Researchers at the University of Birmingham have done a fair bit of research to determine the average cost of breathing on a per person basis. According to their research, the earth’s atmosphere is worth more than 100x the Gross World Product (GWP).  Each person, according to the study, uses around 15 cubic meters of air and this translates to $100 USD per year! One has to wonder if the increasing population will result in economies of scale and reduce the cost of air per person? Also, do very active people use more air, as they exercise? I knew there was a cost of being fit! I am doing my part by holding my breath. (Source: University of Birmingham)

While there is 9% unemployment in the United States, some lucky employees are getting paid even when they are not working. According to the LA Times, Jeffrey Rohlfing is on the payroll as a surgeon for the California State Prison System for $235,740 per annum.  But for the last 6 years he’s has deemed to be incompetent by his superiors and therefore does not treat inmates. In addition he was fired a few years ago and after suing for wrongful dismal was award $541,000 in back pay and reinstated. Now he is assigned to records-keeping. I must admit that I am truly amazed by Dr. Rohlfing’s incompetence. How are you too incompetent to treat prisoners, some on death row? The wonders never cease. (Source: LA Times)

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

Sam

Friday Finance Weekly 17TH Edition (Jul 22, 2011)

Greetings folks and a warm welcome to the 17th Edition of Friday Finance Weekly. If you are a fan of golf, hope you enjoy the Canadian Open this weekend.

There has been a surge of foreign investors into Canadian markets and this week it was determined that there was a net $15.4B of new investments last month. This trend is expected to continue especially since the Bank of Canada announced they will gradually increase interest rates, but in a predictably cryptic manner they did not provide details. In contrast, there were more foreign sellers of US securities than buyers last month which is an extremely rare event. The US however has had a net capital outflow of $67.5B which was the first outflow since June 2010. Broadly there is a consensus that US securities are too volatile for some foreign portfolio managers and this capital flight was expected. It does however appear that the day time drama ‘President Obama vs. Republicans vs. Tea Party vs. Democrats’ may be taken off air on a temporary basis as a solution seems to be forming. Guess what it looks like theUSwill temporally refrain from raising taxes and increase the debt ceiling?!? I must admit that the Republican stance on this is baffling. Refrain from increasing taxes to the wealthy (people that earn over $200K) so that they will create more jobs…hmm…These tax cuts have been around since the Bush era and they have not increased employment. Markets haven’t reacted with any enthusiasm this morning, but with a solution in sight to bail outGreecenext week, we may see some action. (Source: National Post)

Curious as to how profitable those little ads all over Google are? Well, Google earned 97% of its revenues from online advertising. With revenues totaling over $33.3B over the last 12 months, we start to get a picture of how lucrative online ads are. The revenue model works on a cost-per-click (CPC) basis and advertisers have to bid to get the top spot. An analysis was conducted on the top 20 key words…here is a summary of the top 10:

  1. Insurance                                                              CPC:      $54.91
  2. Loans                                                                    CPC:      $44.28
  3. Mortgage                                                               CPC:      $47.12
  4. Attorney                                                                 CPC:      $47.07
  5. Credit                                                                     CPC:      $36.06
  6. Lawyer                                                                   CPC:      $42.51
  7. Donate                                                                   CPC:      $42.02
  8. Degree                                                                  CPC:      $40.61
  9. Hosting (as in web hosting)                                  CPC:      $31.91
  10. Claim                                                                     CPC:      $45.51

Basically anytime a user types in insurance and clicks on the top link, it costs advertisers approximately $55! In addition these results are another indication that we are indeed addicted to debt. The astounding cost per click numbers also explains the high interest rates and legal fees that are being charged. Want to stick it to the man? Search “lawyer and insurance provider to obtain a loan, mortgage and credit card”. That search will cost advertisers $188.82! (Source: Word Stream)

Markets are curious about the prospect of Apple purchasing Hulu (online video streaming service similar to Netflix, but focuses on new TV series). Hulu’s revenues are expected to hit $500M this year and they presently have over 875,000 subscribers, so Apple will definitely have to pay up. Analysts are skeptical of the deal and firmly believe that Apple is taking a closer look on how to develop their own video streaming service. With over 225M iTunes users, adding Hulu won’t be of strategic benefit. In other news it looks like others are trying to duplicate Apples’ success in a rather dubious way. InChinaan expat recently noticed a fake Apple store. Yes that’s right, a fake Apple store was spotted in the Southern Province of Yunnan. Everything down to the layout marketing and iconic blue shirts on employees was duplicated. Interestingly, even employees didn’t know that they were working at a fake Apple store. The fake was fairly easy to spot for avid Apple shoppers as the sign outside said “Apple Store” whereas the actual store just has a glowing Apple logo. The world sincerely hopes that while the Chinese are copying the western consumer experience, they don’t copy the western consumer. Otherwise we are going to have an even larger debt problem.  Apple shares are up by 1.69% to $393.76/share (this is the cost of a roundtrip flight fromVancouvertoLos Angeles). (Source: CBC / Bloomberg / NY Times)

The US deficit is presently at $14.3T and just to give an idea of how much money this really is…if we were to stack $14.3T worth of one dollar bills, this would be an equivalent distance to the moon and back. I was wondering why they scrapped NASA’s space going capabilities! Now we can find the nearest Federal Reserve and simply climb to the moon. (Source: Freakonomics)

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

Sam