A Canadian on Wall Street

The purchase of the privately held Standard Broadcasting by Astral Media announced over the weekend caught my attention, mostly because I had recently been invested in Astral for a short time around the time I owned Alliance Atlantis, buying some of the news about potential further consolidation in the Canadian media landscape. (Although, honestly, it was probably more likely that Astral would be the buyer in any deal — some speculated they’d buy Corus, but I had my doubts. As is usual, the buyer’s stock isn’t doing so hot this Monday morning, so I’m glad to have got out with a modest profit.) What with the planned merger of XM and Sirius Satellite Radio in the US (and its consequent fallout for their Canadian arms), the competition arena for radio shifts again.

It’s hard to say whether or not this Astral-Standard deal is really that much to be impressed by. Radio is fragmenting, and even with their new 81-station grip on the Canadian radio market (Corus Entertainment holding on to second with around 50-odd stations, I believe), it’s a little like that saying about exchanging deckchairs on the Titanic. Not that I think radio is dying, but with the surprising (to me) popularity of podcasts, streaming online radio, iPods and their own custom playlists and the sheer number of ways NOT to listen to the radio, I suppose it is somewhat impressive that radio, in either terrestrial or satellite form, is still alive and mostly kicking. With Google now in the radio ads realm (along with other players like Software Media Exchange and Bid4Spots) there are obviously some people who think radio will continue as a strong, stolid revenue source. It certainly won’t be a major growth industry (the attempted consolidation of satellite radio so quickly in that young industry, with its plateauing subscription numbers is an indicator of this) and I don’t know how practical it is to make bets on potential buyout targets, given that most of the public players have already bulked up considerably. Lately, I’ve been moving back to a more traditional value stance, and less about trying to exploit special situations, since these always seem much harder to call.

As a postscript to this entry, I realized that although Interactive Brokers is a really powerful individual investor brokerage, now that ETrade has flat 9.99 CAD pricing per trade (for those with a minimum 50K balance), IB is no longer the best brokerage for commissions at a certain level of investing. ETrade becomes cheaper if you start buying more than, say, 1-2000 shares (depends on which exchange you’re buying on) with a mid-five digit total dollar value. For instance, if you bought 4000 shares of a stock at 12 USD at IB, it’d be 4000*0.005 = 20 USD, since the max cap is 0.002*48000 = 96 USD according to their current rate schedule. For Canadian stocks, it’s worse: 4000*0.01 = 40 CAD. Something to keep in mind.

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.

So I got out of my positions in Alliance Atlantis and Astral Media recently, mostly because I felt the opportunity cost of waiting for the Canwest buyout to close in the first case and for a buyout or major event in the second case was too high, considering the size of the position I was taking. I was definitely disappointed that no bidding war occurred with AAC.B to push the price up, and even though I don’t have any particularly good ideas for new investments, I felt like my gains in both stocks were marginal at best and I really don’t like holding a stock when I’m close to break even for long periods of time.

On a side note, I finally got back on Interactive Brokers after having left it a long time ago for some arbitrary reasons (no EFT at the time and market data fees that were cutting into what little I kept in the account), in no small part due to this convincing write-up on them (although it turns out the strategy to overcome the lack of interest on the balance less than $10,000 isn’t so perfect). Although the website is a bit of a hodgepodge of links and windows and so-so user interface choices (why is it all accessed from a drop-down box?), it’s great to have the better commission charges and foreign exchange rates (the FX trader interface seems pretty slick although I have no point of comparison, having never tangled in the dicey realm of forex trading) and access to much more global markets, even though I suspect the bulk of my investing will still go towards Canada and the US.

The Netherlands is the new tax haven (at least where royalties are concerned). Surprise, surprise: the Rolling Stones and U2 are big users of these shelters.

Terrific article about economics as it works in the animal kingdom, sent to me by a coworker. The following example has felt somewhat appropriate lately, heh:

Sarah F. Brosnan, one of my colleagues at Yerkes, went further in exploring reactions to the way rewards are divided. She would offer a capuchin monkey a small pebble, then hold up a slice of cucumber as enticement for returning the pebble. The monkeys quickly grasped the principle of exchange. Placed side by side, two monkeys would gladly exchange pebbles for cucumber with the researcher. If one of them got grapes, however, whereas the other stayed on cucumber, things took an unexpected turn. Grapes are much preferred. Monkeys who had been perfectly willing to work for cucumber suddenly went on strike. Not only did they perform reluctantly seeing that the other was getting a better deal, but they became agitated, hurling the pebbles out of the test chamber and sometimes even the cucumber slices. A food normally never refused had become less than desirable.

On a vaguely related note, a good piece on the shift from efficient markets theory to behavioural finance, by Robert Shiller.