Archive for May, 2006

Should you invest more overseas?

Wednesday, May 31st, 2006

A couple of weeks ago I wrote about how Motley Fool says to give them money so they can show you how to be a successful investor like Warren Buffet. Of course that means finding US stocks to invest in.

Today I read an interesting article from Robert Kiyosaki who asks a potent question: are you going to listen to a financial planner or do what Warren Buffet does? Kiyosaki thinks that Buffet is bearish on the dollar because he sees the US economy being managed badly. That’s why Buffet is starting to invest overseas.

MasterCard IPO reminds me of Google in some ways

Thursday, May 25th, 2006

Thursday, MasterCard shares will begin trading at 39.00 a share.

I see some similarities with Google since both companies started trading lower than expected. MasterCard is expected to raise more than Google’s 1.7 billion in 2004, but one wonders if it will see the significant gains made by Google.

MA, the ticker symbol for MasterCard, is being priced below expectations because of antitrust concerns (650 million from the IPO is being put aside to cover future legal expenses) and protests by retailers that fees are too high. However the 39.00 starting price on MA shares is hardly exclusive and we are talking about a very well-known brand with an excellent moat.

Shinsegae is acquiring Wal-Mart Korea

Monday, May 22nd, 2006

Shinsegae is acquiring Wal-Mart Korea for 825 billion won ($882 million) in a move which should benefit both companies. Investors agree that it’s good for Shinsegae, up 6.6 percent to close at 460,000 won ($484).

Shinsegae will significantly strengthen it’s E-mart brand while Wal-Mart gets a good price for a business that was seeing sluggish growth and sales last year in South Korea that totaled 750 billion won ($787 million).

I’d like to know how much of that $787 million was profit, but have been unable to find that information. With the limited information I have, I see this as a plus for Wal-Mart stock. Also, the deal still needs to be approved by the Korean overnment.

When is a good time to invest?

Sunday, May 21st, 2006

Many analysts believe that we need some more inflation-friendly data, data that will indicate the Fed needn’t raise rates for a bit, in order to see a significant rebound in the markets (which lost 4.4% in 6 sessions). There may be a small bounce that isn’t very meaningful:

“We’ve had a very abrupt correction, down to an area that provided support for the market in February. You can expect a bounce here,” Russ Koesterich, senior portfolio manager at Barclays Global Investments, said. But, “if you get a modest bounce next week on low volume, you really can’t attribute much to it.”

Personally, I don’t try to time the market so I won’t be giving advice about when to invest. Who knows if this week, next, week, or next month will be best?

Interestingly flawed logic from Motley Fool

Thursday, May 18th, 2006

I suppose it’s no surprise that Motley Fool says we have to try to beat the market. If everyone started indexing, they’d all be out of jobs, after all.

So the argument goes that we can follw the “cear path” set by Benjamin Graham, Warren Buffett, Walter Schloss, and Bill Miller (if we listen to Motley Fool). You see, it all very simple:

Figure out what a company is really worth.
Determine how much the stock market is asking for the business.
Invest based on the difference between No. 1 and No. 2.
Wait for the market to realize and correct its mistake.

Actually, I’m thinking that’s a little bit harder than that. I know a few Fool subscribers. None of them are rich…

By the way, if you’re curious they are recommending First Data [NYSE: FDC], Federated Investors [NYSE: FII], and Lloyds TSB [NYSE: LYG]. I actually like Lloyds and its 6.1% dividend.

Mad Money dedicated blog

Tuesday, May 16th, 2006

So I found a relatively new blog, with archives going back to Decmber 2005: Jim Cramer’s Mad Money. As you might imagine, a big focus is placed on Cramer’s stock picks. To find out which stocks Jim Cramer is recommending, go to Mad Money Stock Picks. The blogger bolds the picks he likes and you end up with interesting companies like Microsoft which was recommended on May 12th.

You may recall last week, when Cramer said “We’re so clearly the worst of the world today…You gotta love the French and Germans. They’re socialists and they’re killing us. They don’t have central banks that are opaque and difficult to understand.” I’m not convinced that the German economy is killing anyone – there are reports that unemployment is higher than being reported. Still, Cramer’s Stop Trading contains lots of bullish sentiment.

All in all, Mad Money is a blog worth checking in on to find out which stock picks Cramer and our blogging friend have in common.

By the way, you might start seeing a little more about Cramer on this blog. I feel like the only stock blogger not talking about Cramer sometimes…

Politics and the risk of doing business abroad

Sunday, May 14th, 2006

An interesting news item in the LA Times talks about how some US oil companies like Chevron and ExxonMobil will be affected by Venezuelan President Hugo Chavez, and his quest to recover “sovereignty” over Venezuelan oil.

This doesn’t mean the oil companies will stop doing business in Venenzueala:

Energy economist Williams summed up the situation for Chevron and others. “He’s taken a majority of the ownership, the taxes are higher, the royalties are higher, and he hasn’t given them any money. Now they have to decide whether they want to stay and play.”

If there is still money to be made, he added, some companies may well opt to “keep their mouth shut and stay.”

30/360 bond interest accrual question

Thursday, May 11th, 2006

A question I heard recently: Any bond traders out there that just love discussing interest accrual? Have a client disagreeing with me over number of days of interest paid on a bond. Issue settles 1/23/06 (long 1st cpn) and 1st pays 7/31/06. With a 30/360 SIA day count, how many days of accrued should be paid?

Many people answered 105 days, but a few calculated accrual like this:

106 days:
1/23/06 thru 1/31/06 = 9days
2/1/06 thru 5/8/06 = 97 days

The response to that calculation: I got 105, if it accrues 30/360, why does the 31st of January count in this scenerio?

The reason Jan. 31st would count: Since it would pay the 31st of Jan/July. SIA convention says treat 1/23/06 to 1/31/06 as 1 then 1/31/06 to 5/8/06, otherwise you lose a day of interest from 1/23/06 to 1/31/06…

The reason this is different is due to the passing of a “coupon date”. So you’d want to compute the number of days prior, then since coupon seperately. Not as if it was a period between coupons (like if it paid 1/20 & 7/20. So since this pays 1/31 & 7/31 (but they skip 1/31 cause an 8 day coupon is dumb), you split up the accruals.

this is something that people argue over constantly, even guys trading bonds for 20+ years. In case anyone cares, this is discussed in SIA Standard Securities Calculation Methods 1993, vol. 1, pages 17-35.

Good UK stocks getting hard to find

Saturday, May 6th, 2006

Fidelity’s Anthony Bolton, one of the UK’s top fund managers is preparing for a setback in the UK stock market. Since he correctly called the bull market in summer 2003 (UK stocks have close to doubled since March 2003) this warning does carry significant weight.

The Fidelity Special Values trust said in a statement to the stock exchange: “The manager… believes that after three years the bull market in the UK has now entered its final stage. The number of stocks that meet the manager’s investment criteria have fallen.”