Category: Stocks

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Stocks

Stock buy backs got Borders into financial trouble

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google finance (NYSE:BGP) cash flow, note the numbers in bold

In Millions of USD
52 weeks ending 2008-02-02 52 weeks ending 2007-02-03 52 weeks ending 2006-01-28 52 weeks ending 2005-01-23
Issuance (Retirement) of Stock, Net 7.60 -122.70 -238.30 -132.50
Issuance (Retirement) of Debt, Net 43.40 303.30 -1.40 6.80

I has been a Borders customer for a long time, just feel sad to see my favorite bookstore got into such a big financial trouble. But again, they (the former management) kind dig a hole themselves: bought back stocks from year 2004 to 2006 (spent $132.5 m, $238.2 m, $122.7 m). Then scambled to borrow $303.3 m in year 2006, and borrow and issue stocks in year 2007 (too little too late).

Business wise, I think the popularity of iPod/iTune almost killed the music CD sales, and the rise of Amazon (low cost) affect book side of business.

Pershing Square (Bill Ackman) has a 33.62% stake in Borders (gurufocus). BTW, his BGP holding has dropped 96% of its value, according to Gurufocus.

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Stocks

This emperor has no clothes

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Cramer Stewart saga goes on.

Madoff will go to jail, for life. He deserves it. Just thinking how many people (esp. the older people) lives turned upside down because of his ponzi scheme.

How many clothes-less emperors still out there?

Lesson for ordinary investors
Refer to John Bogle, 6 lessons for investors. Get self educated: get a little finance and psychology lessons, so that one knows more than Dow (S&P should be the real benchmark), compound annual return of 10% is not bad at all, fear and greed etc.

I also think there are 3 types of financial advisors in money management business.

1) Crooks like Madoff and Allen Stanely: this is minority.

2) Most people fell into this category, mediocre. I remember one of my colleagues told me last Sept. his broker told him buy GE at around $22, because he thinks that’s a bargain price for a blue chip like GE. Oh well, we all know how it worked. Most brokers are people who passed series 7 or 63 tests, but have not much idea of accounting and finance. They learned about stocks mostly from CNBC or something like that. How can an average investor beat the market by listening to those guys (or ladies)?

3) The heros. Buffett was one (he had a partnership before the Berkshire Hathaway, in a broad terms, his Berkshire is still in money management business). Peter Lynch. Bill Miller (before 2007).

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Stocks

S&P 500 10 years chart

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March 04 1999 to Mar 02 2009, courtesy of Google Finance.

SP500_Mar04_1999_Mar02_2009

Two thoughts pop up by looking at the charts:
1) We probably have not hit bottom yet;

2) The drop in mid 2008 till now is so sharp, 50% in one year 🙁

BTW, I think it’s a good idea to stay away from the market these days. Learn from the Oracle of Omaha.

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Economy Stocks

Bank nationalization may not as bad as it sounds: I

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What is nationalization
This is my understanding. Usually a company has 3 types of capital: debt, preferred stock, common stock. In terms of ownership the equity holders (common stock holders) own the company. We say they borrow from the debt holders: in return they pay interest and principle to the debt holders down the road.

In the case of bankrupcy, debt holders have priority over preferred holders, preferred have priority over common, etc. (note all debt are not euqal too, some are senior than others, some are secured, some are not).

Continue reading “Bank nationalization may not as bad as it sounds: I”
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Economy Stocks

The end of rampant consumerism

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(Update May 2020) I found from this website, it seems the US consumer saving rate went up a bit in last 5 years, from 6%, 8% to most recent 13% . I can understand the last part due to pandemic. In fact our restaurant eat out (to go, take out) shrunk a lot. My wife is stocking up groceries and cooking much more.

(Original Feb 2009) From Yahoo Tech-ticker.

I am sure car companies don’t like this, so as the jewery makers, Nieman Marcus, Saks 5th Ave. etc etc.

The most interesing point I heard from this clip is American consumers recently shift from overspent 6% (negative saving rate of 6%) to a saving rate of 3%.

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Stocks

Blackberry everywhere

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Since I have done some travel lately, I have oppertunity to see people in the airport or airplane. It seems to me Blackberry is everywhere. I remember Blackberry was popular a few years ago (also from airport impression), now it’s pervasive / everywhere. There are lots of coverage on Blackberry recently such as: 1) Obama does not want to give up his Blackberry; 2) The Blackberry Storm, first touch screen blackberry launched by Verizon wireless, although sold about 500,000 units in its first month, received mixed review from consumers (the bugs). Of course, I noticed people checking on emails and looked like they are VIPs, which reminded me the default signiture line of Blackberry email: sent from my wireless device. Interestingly, iPhone copied this idea and has this “sent from my iphone” line.

But I see one problem in the Blackberry revolution. Last week my Blackberry browser stopped working. I did some online search and found that Blackberry has 4 browsers (source: crackberry). Isn’t this insane?

One thing Yahoo Mail beats GMail
I have been using GMail for quite some time (since 2004), but I have not switched to GMail yet. GMail has some nice features such as group email threads, and integration with Google talk. But I found one more feature I liked about Yahoo Mail lately: the full header feature. It tells me all the information about sender, the path, etc. This feature alone helped me solve a mystery of return path (address) lately. So go Yahoo !!!

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Stocks

Banking crisis?

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It seems the financial crisis has been more like a banking crisis these days, with the RBS virtually nationalized by the British goverment, and Citi and Bank of America increasingly can not stand on its own. The No. 1 and No. 2 US banks according to market cap, J.P.Morgan (NYSE: JPM) and Wells Fargo (NYSE: WFC), are also under pressure today, both hovering around $20 and $15, respectively.

RBS telegraph uk
(Source: telegraph.co.uk)

Of course this all happens today as the new US president sworn into office. It appears to me the market does not like the stimulus package proposed by Obama team, or the uncertainty around it? Plus the controversy around his treasury secratery pick. All this bring uncertainty to the market, and we know the market does not like uncertainty.

What will we go from here? Will all the big US banks taken over by the federal goverment? It seems unlikely because this country lives or dies on the private business or entreprenuership. With goverment controlling large banks, it will be like (dare I say) China.

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Stocks

My thoughts on Bank of America (NYSE: BAC)

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Bank of America is back in the news because they asked and got $20 billon from US govement, to back the loss from Merrill Lynch acquisition.


(Source: Yahoo Tech-ticker)

Personally I like Bank of America, ever since I became their customer serveral years ago. Two benefits of being BoA checking acct cosumer: 1) Their branch and ATMs are all over the country; 2) In addition to that, since I travel to China once a while, I like the fact I can withdrawl Chinese Yuan (RMB) from China Construciton Bank (CCB is BoA Chinese partner), without transaction fees. CCB is also a large bank in China and their ATMs can be found in many places.

Now to the investing of BoA (NYSE: BAC). Did I say investing? With the stock price of BoA approach to $7, it seems to me it’s more and more like speculating. I remember someone (Jim Cramer?) once said any bank stock traded under $5 is speculative.

Continue reading “My thoughts on Bank of America (NYSE: BAC)”
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Stocks

What a year

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S&P 500 index (google Finance), the US bench mark index used by many mutual fund managers, dropped 38.49%. Even the greatest investor guru of our time Warren Buffett could not escape the bear attack, his holding company Berkshire Hathaway (NYSE:BRK.B) dropped 32%.

SP500_2008_small
(In 2008 S&P 500 index dropped 575.24 points or 38.91%, from 1478.49 to 903.25)

Continue reading “What a year”
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Fun Stocks

Saving Citi Bank

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CNBC Maria Bartiromo interviewing Saudi prince Awaleed, the largest shareholder of Citi Group (NYSE: C), after the US gov (aka we the tax payers) bailed out the Citi and the prince. Here are the terms (PDF). Maybe president Bush gave him assurance that his holding won’t get much diluted before the rescue? The video lasts 18 minutes.

Where is the money for Detroit auto makers, by the way? Sorry no Saudi prince owns the big 3 stocks, and nobody can call the President directly.