Chris Lau - Seeking Alpha

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Monday, June 28, 2010

Notes on the How the Internet is Fostering our Stupidity

Bloomberg Businessweek reviewed the book 'The Shallows: What the Internet Is Doing to Our Brains.'  In it, Carr states that we are experiencing "a reversal of the early trajectory of civilization: We are evolving from being cultivators of personal knowledge to being hunters and gatherers in the electronic data forest."

With that frame of mind, this note will not be bombarded with the latest facts, statistics, or headline. Instead, three stories for essential reading are below below. 

One:
Barry Ritzholtz, The Big Picture, writes "A Closer Look at the Second Leg Down in Housing."  In it, he discusses the direction for home prices in the U.S., following the end of the home tax credits. As posted on InvestorInsight, Mauldin states that "The firm began raising cash in Q1 of 2010, and by the time the first quarter was over, was only 50% long. They sold more stock in April, and in a bit of good timing that Ritholtz will tell you was "dumb lucky" went to 100% cash on May 5, 2010 – the day before the 1,000 point flash crash. "

Two:
World Debt (source: the economist). This in turn makes the G20 response to European debt that much more significant.

Three:
RIM - Research In Motion - Stock decline over 10% after earnings were announced
What was Waterloo Canada's RIM thinking when a Bank of America Analyst asked:

"What will help RIMM regain U.S. market share? But it seems that AT&T channel is very strongly aligned with Apple. And Verizon and Sprint seems to be aligning with Android. So where does that leave RIM?

So the specific question I have is, what motivates customers to buy a BlackBerry 6.0 product instead of say the new iPhone 4.0 or new Android products? Other than network efficiency, what kind of differentiator should we focus on?"

RIM CEO Balsillie's Response:
"Well, I mean, be careful about your implicit assumptions in your question, or shall I say explicit assumptions in you questions. Yes, I think you guys just have to watch and see what the plans are.

I think there's a lot of implicit and explicit assumptions, and that maybe should be examined. And part of that is the question of how powerful is their innovation is a good question, with the timing of it, it's a good question. I think an important question to ask is, how much does constructive alignment matter to a carrier, because that's been just an enormous issue throughout Europe and Asia, and definitely coming on in Europe.

And I think how much does efficiency matter, and when you look at these pricing plans, I think that that should tell you something. So I mean, we watch and see. I mean, we have unprecedented campaigns and device programs and commitments in our history. And I'm just not going to talk anything more about our products and our launches until their time."
Not getting an answer to a question is one thing, but being told how to ask a question might be looked upon as...odd.



Monday, June 14, 2010

Notes on Investing in Range-bound Markets: Pfizer

Vitaly Katsenelson, author of the book, Active Value Investing, believes the markets are range-bound. He discusses the case of investing in pharmaceuticals, and in particular, Pfizer. Pfizer, as you'll recall moved nowhere in the last 10 years (and even lost shareholders money). The patent on Lipitor is expiring soon, and Pfizer continues to invest billions ($11B) in Research and Development. Discounted in the stock is the fact Pfizer has hundreds of drugs in Phase 3.

In short, shareholders get 4% in yield, can adjust to inflation or deflation (through changing prices), can acquire to grow (it bought Wyeth at respectably low multiple, at 10-13x instead of at 20x), and any new drug developed will benefit shareholders at stock price premium (as measured by P/E).

Few investors watch videos on Yahoo, but Yahoo is starting to produce better content again. Below is Katsenelson on Yahoo TechTicker:



Analysis:
Note that Pfizer's R&D spend was $7.767B ending Dec 31 2009. While recent cutbacks, layoffs, and site closures have been hard, the company appears committed to R&D. This is according to Martin Mackay, Ph.D., president of Pfizer PharmaTherapeutics Research & Development in a recent interview.

Sunday, June 13, 2010

Essential World Cup 2010

1. An instant view of the matches for each day, by match, team, group and stadium was created by Marca.com:
http://www.marca.com/deporte/futbol/mundial/sudafrica-2010/calendario-english.html

h/t zerohedge

2. World Cup and Economics: Goldman Research Piece.
h/t The Big Picture

Tuesday, June 08, 2010

Europe's ( PIIGs) Debt Explained

If pictures are worth a thousand words, then what is a photo illustrated with flowing data? Below is an illustration of the web of debt flowing among and outside PIIGs. Note that Britain might need to be referred to as the UK, as that would include Northern Ireland.

(click image to enlarge)





























Source: flowingdata

Tuesday, June 01, 2010

Mortgage +1.75% Rate Increase in Canada?

In David Rosenberg's newsletter today, Rosenberg speculated a 175bps rate hike in Canada over a 16-month period. 

 Funding pressures are escalating again in the global banking sector as contagion risks intensify. What a wonderful environment for the Bank of Canada to be in as it contemplates its well telegraphed interest rate move — the Bank typically goes 175bps over a 16-month span and while Mr. Carney has no track record in a tightening cycle, let’s just say that the institution he presides over has never done anything less than 125bps. We shall see how market expectations are navigated in the press statement if the Bank does pull the trigger.
This forecast is not entirely impossible, given the over 6% GDP growth in first quarter:

Housing and related spending plus inventories accounted for 70% of total GDP growth in Q1.
Conversely, growth in housing may slow in the second half of this year:


we believe that we will see a major slowdown in activity in the second half of the year. We have seen signs already that housing activity is slowing especially in the face of higher mortgage rates in Q2 and this will continue into H2.