The ongoing financial turmoil and financial discussion thread

[Bobblehead]

For the few lucky hoarders, this is a time to feel both smug and predatory. Japanese firms have been able to make $71 billion in foreign acquisitions so far in 2008, which is on track to be a record year. Bill Gates thought his company should have enough cash to survive a year with zero sales: its $21 billion pile now gives it even more options than normal. Cash-rich drugs firms, such as Eli Lilly, Roche, Merck and Bristol-Myers Squibb, have all said that the financial turmoil presents an opportunity for them to buy biotechnology companies at knock-down prices. Germany’s Siemens plans to provide finance for customers that are strapped for cash. A study, aptly from Citigroup (which axed 52,000 people this week), shows cash hoarders now outperforming indebted firms, having lagged before.

http://www.economist.com/opinion/dis...ry_id=12637043

[SeeGeeWhy]

Originally Posted by Slava

There is not really a quick and easy way to do this. I have to say that just because the cash is higher than the valuation though does not guarantee you returns...it will obviously give that company a competitive advantage however, and should be considered.

Yeah, I suppose one would have to scour financial reports and get a feel for this the old fashioned way (aka - slow as molasses).

I am curious to see if there are any small cap companies with reasonable cash positions and low market caps that might be targets of privatization efforts.

[Nancy]

Originally Posted by Slava

There is no money market fund that has a 2% MER....

Why make blanket statements without researching first? There are about 15 MM funds with MERs greater than 1.5%

Just a few at random:

Co-Operators Money Market VP 2.18%
BMO Guardian Cdn MM 1.52%
Primerica Cdn MM 1.84%
Clarica SF CI MM 1.67%

[Slava]

Originally Posted by Nancy

Why make blanket statements without researching first? There are about 15 MM funds with MERs greater than 1.5%

Just a few at random:

Co-Operators Money Market VP 2.18%
BMO Guardian Cdn MM 1.52%
Primerica Cdn MM 1.84%
Clarica SF CI MM 1.67%

Your right, I should've qualified that comment a little more. In any event, if you net the 1% that is after the MER, so IMO its a moot point.


That, and why you would buy a MM fund is kind of beyond me to begin with when there are other options that are set rates of return with no risk that are much higher.

[SeeGeeWhy]

Originally Posted by Slava

Your right, I should've qualified that comment a little more. In any event, if you net the 1% that is after the MER, so IMO its a moot point.


That, and why you would buy a MM fund is kind of beyond me to begin with when there are other options that are set rates of return with no risk that are much higher.

Such as?

[MoneyGuy]

Originally Posted by Nancy

Why make blanket statements without researching first? There are about 15 MM funds with MERs greater than 1.5%

Just a few at random:

Co-Operators Money Market VP 2.18%
BMO Guardian Cdn MM 1.52%
Primerica Cdn MM 1.84%
Clarica SF CI MM 1.67%

Without actually checking, I was going to guess that Investors Group and Co-operators MM funds might be in that stratosphere. Both are known for high costs. The only time I use MM funds is for a short-term parking place. I don't think I have any money in MM funds right now that isn't being dollar-cost averaged out over a few months. There are better-paying options available so I just use MM funds now for convenience and if the money is heading elsewhere.

[Slava]

Originally Posted by SeeGeeWhy

Such as?

Quite a few companies offer High Interest Accounts that will pay you about 3% or more. There is virtually no risk there, but you get three times the rate.

[MoneyGuy]

Originally Posted by Slava

Quite a few companies offer High Interest Accounts that will pay you about 3% or more. There is virtually no risk there, but you get three times the rate.

YOu can say it, Slava. Man-U-Life-Advantage. I haven't you so quiet since the guy refused to give you the hockey jersey because you weren't bald.

[Slava]

Originally Posted by MoneyGuy

YOu can say it, Slava. Man-U-Life-Advantage. I haven't you so quiet since the guy refused to give you the hockey jersey because you weren't bald.

hahaha, well it probably didn't help that you were heckling me at that point!

I was just trying not to be so biased...there are actually some good rates through some of the premium MM funds that we use from time to time as well. Dynamic has one and RBC has another that we quote sometimes.

[Draug]

Originally Posted by Slava

Quite a few companies offer High Interest Accounts that will pay you about 3% or more. There is virtually no risk there, but you get three times the rate.

PC Financial has a high interest savings account called Interest Plus Savings account.

The current rate is 3.05% for balances over $1000, with an additional yearly bonus of 0.03% to 0.25% depending on the average balance and age of your account.

[Nancy]

Regarding the previous suggestions, I think the problem is that Fotze is limited to the fund offerings provided by his employer sponsored investment plan. My personal experience is that the funds offered to me through these employer plans were always poor performers with high expense ratios and very limited selection. If your employer is not doing contribution matching, then I think you may be better off doing your monthly contributions with a company of your own choosing. I believe you can still get the instant tax relief by filing a TD-1 to have your tax deductions reduced on your paycheque. MoneyGuy or Slava can give you advice on that.

[MoneyGuy]

Originally Posted by Nancy

Regarding the previous suggestions, I think the problem is that Fotze is limited to the fund offerings provided by his employer sponsored investment plan. My personal experience is that the funds offered to me through these employer plans were always poor performers with high expense ratios and very limited selection. If your employer is not doing contribution matching, then I think you may be better off doing your monthly contributions with a company of your own choosing. I believe you can still get the instant tax relief by filing a TD-1 to have your tax deductions reduced on your paycheque. MoneyGuy or Slava can give you advice on that.

I tell clients they can do this and that it's a good thing, but very few bother. YOu have to reapply each year so it requires ongoing effort. It doesn't reduce the taxes you pay, but it means you get to keep your money in your pocket longer instead of Ottawa's. I find that many people actually like getting that tax refund each year. It's like a gift. I've (nicely) argued with clients about this (okay, discussed). I've offered that they could give me a hundred dollars a month, too, and I'll give it back to them in May without interest just like CRA does, but so far no takers.

I think some moderator should change the name of this thread to the financial advice thread.

[newts]

Originally Posted by MoneyGuy

I tell clients they can do this and that it's a good thing, but very few bother. YOu have to reapply each year so it requires ongoing effort. It doesn't reduce the taxes you pay, but it means you get to keep your money in your pocket longer instead of Ottawa's. I find that many people actually like getting that tax refund each year. It's like a gift. I've (nicely) argued with clients about this (okay, discussed). I've offered that they could give me a hundred dollars a month, too, and I'll give it back to them in May without interest just like CRA does, but so far no takers.

I think some moderator should change the name of this thread to the financial advice thread.

Is it the TD1213 form that needs to be filled out for this?

[MoneyGuy]

Yes, TD1213.

Edit: I went and found this for you.

http://www.canretire.com/articles_details.asp?id=539

[Wookie]

I think a good example of the spring loaded comments by slava or MG would be CNQ. Hit a low last week of $34.19. This was shortly after I received an email from tristone capital saying

Stock is getting pummeled today. The stock looks cheap relative to sensitivities at low oil prices:
It appears as thought the market is not adequately factoring in the company's '09 hedging program. They have 30-40% of production hedged at ~US$81/b.
When we run the NAV on a long-term flat price of US$50/b and US$5/mmbtu NYMEX, our NAV is $39/sh. Thus, the stock is trading at a long-term implied price of US$50/b.
Regarding Horizon, I ran a sensitivity assuming this project produces zero in 2009 at a US$50/b price. Free cash flow is still high at $2 billion, largely reflecting the benefit of the hedges. This is on their already announced CAPEX program of $4 billion in '09; there appears to be little risk to this spending.
The stock looks well protected down here, and arguably they still have some financial room left to make acquisitions in the $1-2 billion range. I would highlight this as one of the lower risk large caps to be picking away at.

Today it's closed @ $50.54.

That's a quick 48%.

I wanted to buy some before it fell to $34 when it was at $41 (that's when I got the email), but I was sad/nervous about realizing a loss in some other crappy company I own. Now, I'm kicking myself.

If things don't get any worse for the O&G sector there's a 48% recovery that was missed out on in 4 days.

[MoneyGuy]

Originally Posted by Wookie

I think a good example of the spring loaded comments by slava or MG would be CNQ.

Hey, credit where credit is due. I coined the spring loaded comment. I'll let Slava take credit for something else.

[Slava]

Originally Posted by MoneyGuy

Hey, credit where credit is due. I coined the spring loaded comment. I'll let Slava take credit for something else.

Fine....can I say that I invented the internet or is someone else taking credit for that one?

[Nancy]

This guy sounds a bit like Claeren:

http://www.youtube.com/watch?v=r9A_bIEfM1g&NR=1

[Claeren]

Originally Posted by Nancy

This guy sounds a bit like Claeren:

http://www.youtube.com/watch?v=r9A_bIEfM1g&NR=1

haha, yeah, but I am not THAT negative. Or maybe it is more that I am convinced the powers-that-be would pull enough strings to keep putting it off a little further into the future again... "no news is good news" it seems?

I do think America has some pretty serious underlying structual problems but I think the world is more than equiped to take its share of that world influence from America as America losses it. So as much as a slam America I do not think all is lost.

Americans (along with a number of other western powers) have never been poorer though, its government has never been as bankrupt and its companies have never been so fragile.



But yeah, this recent rally is TOTALLY founded in fundamentals! lol



Oh, and on Friday the Bank of Scotland quietly failed! British government only had to buy up 60% of its equity and guarantee its loans....
http://www.nytimes.com/2008/11/29/bu...ess/29rbs.html


Oh, and recent reports show the banks quietly borrowing more money per day than ever before AND seperately, the unemployment numbers for the last month were off and have been quietly revised much higher.
http://biz.yahoo.com/ap/081129/fed_credit_crisis.html




You never know though, maybe it will keep going up all the way back to 14,000!?


I would suspect though that the big players are using this time of quiet, and the resulting rally, to sell off their own positions to all of those lucky little guys who will be left holding the bag when the REAL (bad) news starts coming again....

But yeah, the world won't end, it is just money! In fact, as I have said, i think this is all good for the economy in the long run. The market is supposed to cycle! It is artifically preventing that cycle that has caused so much of these problems....


Claeren.

[Nancy]

A couple more "depressing" things I heard this week.

One was a spot on the news hilighting a collapse in international shipping. The amount of goods being shipped from Asia has dropped off significantly. It's so bad that charter rates have fallen from $200,000 a day to $2,800, or so claimed the other. Translation: Chinese exporters must be hurting like heck.

Another was from the web site that I found the above video on. On that site, they have guys tracking and forecasting Vancouver RE prices for the month, and they are predicting that the average single family home price in Vancouver will decline by 8% to 10% this month alone, and the median could decline by 5% or more. Months of inventory is now 21. (Calgary, by comparison, has 8 months of inventory.)

The thing about Vancouver that has me wondering: how can Vancouver prices be so high relative to personal incomes (which are much lower than Calgary) and there NOT be subprime lending going on there? If Vancouver real estate follows the same collapse as San Diego's, how can this NOT take down at least one Canadian mortgage lending institution? In other words, which Canadian financial stocks should I be shorting right now?