A Canadian on Wall Street

From my eye in the (Internet) sky, Bjorn: http://www.alleyinsider.com/2007/10/its-finally-off.html (good old Henry Blodget!)

I said as much here, although interestingly I felt it was okay for eBay to purchase Skype, provided they could run them as separate businesses. All that effort put into integrating the companies is probably what hamstrung Skype in the end. I think what this proves is that the average man on the street is more strategically savvy then many of the people on the inside, who are probably unable to gain perspective, bombarded by statistics and demographic studies and MBA-quackery market research by people who may have never even used eBay or Skype; I’m sure there were paydays for those who helped instigate and shepherd the deal through, as well. Mistakes happen at all levels.

Also, shorting RIM, as I predicted, would have been foolhardy. The stock has more than doubled since I wrote that, and of course the iPhone is out and has been doing well, if not spectacularly, hence the startling price drop within the first few months of its release.

Nothing has really piqued my interest in the equity markets these days, besides. This is a strange and unsettling market which is a mix of bad news and all-time highs, one that I — in my limited experience — have not dealt with and so I’ve taken to standing back and waiting. I’ve decided that it’s probably worth it in the long run to wait for deals, rather than just throwing my money after already highly bid equities, hoping to cash in on momentum. It’s a change in my purchasing style that I don’t like, but it’s difficult in current conditions to do anything but. I’m just happy to have made some money on various stocks, like Nintendo, Genco Shipping and NVidia while they were relatively low-priced.

An excellent summary of the myths around home ownership, especially as a means of investing. As much as I’d be happy to own here in the highest priced city in Canada, it wouldn’t be because it was a good investment but more for things as now-cliched as quality of life and those mountains, wow, those mountains! (This is a reference to one of my friends from my hometown of Toronto commenting that the only thing Vancouverites ever seemed to talk about when he was here was the mountains: “Hey, did you see the mountains? Check out the mountains!” Of course, that hasn’t really been borne up by experience. If anything, the locals barely notice them and take them for granted. He was probably talking to fellow easterners who’ve moved here and had a hard time moving back.) Anyhow, if I hear another person talk about how real estate “always goes up” and how it’s a “great investment”, I’ll hit ‘em with the one-two punch of this article and Shiller’s Irrational Exuberance, second edition (where he adds much detail about the real estate bubble that is seeing its most prominent deflation in the US at the moment).

Update: On a related note, I like how this succinctly, if perhaps unintentionally, sums up the problem with a lot of investing prognosticators:

Last seminar I went to (2005 maybe?) he showed some of his predictions, and how successful they’ve been. He didn’t talk about the unsuccessful ones though.

Okay, another David Olive post — hey, the man knows his stuff and writes incisively. I’d rather every entry here be a link to one of his posts (at least on business or investing) than the kind of flippant commentary you tend to find in the financial media. This one’s on the difficulties facing large, once fast-growing companies.

David Olive writes a sort of elegy for the days when Warren Buffett was an investing superstar. Or at least, it reads like it to me. I’ve always found the fact that Buffett continues to have this giant fanbase even while his investments in recent years have been somewhat suspect kind of interesting. Past performance really does have an outsized influence on people’s perceptions — like in any field, one or two big plays can make your reputation for a long time, much like some hoary academians continue on on the basis of work they did as bright-eyed youngsters.

On another note, I wish they’d inflation-adjust numbers like the ones Olive quotes: “A $1,000 investment in Berkshire shares in 1965, during the company’s first full year under Buffett’s control, was worth $2.4 million by 2005.” That’s not unlike someone claiming that they bought their house for 5 figures and now it’s worth a million, 40 years later! I wonder if there are properly inflation adjusted returns for Buffett’s performance somewhere.

A select article from Robert Shiller’s interesting commentaries on Project Syndicate. It’s about the much-mentioned “the stock market has historically gone up” cliche that many people seem to believe implies that stocks will assuredly be a good investment in the future. Frankly, there’s no guarantee of that — as Shiller summarizes:

Of course, investing in stocks is not a bad thing. Indeed, the stock market is an important component of any modern economy. But we should not make plans that rely on high returns, as many (including some governments) appear to be doing.

Sometimes I really wish we had America’s competition environment. Considering the number of trades I do in a month rarely breaks double digits, that would be an ideal account for me. (Also see: Zecco, but I think BoA has a bit more of a name.)

I really hate headline writers who work in business news, because you end up with stuff like this: Quadruple profits served up at Tim Hortons. In the entire body of the story, no mention is made of the fact that there were one time costs that depressed earnings in the previous year’s quarter. Even in this story, the mention is three-quarters of the way down the page:

Earnings a year earlier were cut by C$33.5 million to reduce goodwill and the value of assets after a 2004 acquisition in New England, Tim Hortons said.

And here, halfway down:

However, the earlier results had been dragged down by $42.5 million in one-time items partly related to its initial public offering.

Not even sure why those two explanations don’t jibe. Admittedly, it’s good news for the person who’s willing to do more reading than the average person, but it would almost be worth it to have a site devoted solely to debunking these kinds of news items. But it seems rare that the financial media has time for such in depth coverage, to the detriment of itself and those who read it without a keen eye.