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laidbackluke

laidbackluke
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  • The Way To Play Canadian Housing Market Bust [View article]
    I am curious as to why there is such a large expectation of Canadian bank shares tanking. Shorting the banks is a dangerous game, not least because of the large dividends they pay out.

    Borrowers are required to take out CMHC insurance on mortgages where less than a 20% downpayment is made. This offloads the risk to the taxpayers (who are inherently backstopping the government agency), and will save the banks in the event of a protracted downturn.

    Furthermore, Canadian mortgages are recourse loans, which is vastly different from the US. The obligation still exists even if bankruptcy is declared, as with student loans. This makes it more likely that payments will continue on mortgages.

    Tigerdemi, your response was essentially worthless, since you posted no analysis or backup for why to short the Canadian banks. Bank of Nova Scotia is in position to accumulate some fantastic assets in Latin America after selling the Scotia tower for $1.3B. It already has a strong presence in a few regions, and with distressed Spanish banks shedding assets, BNS will be able to buy strong assets at very reasonable prices.

    I am more inclined to agree with the author about shorting sector-specific stocks, but I would rather make it a pair trade to mitigate the risk, especially when shorting a REIT that pays a sizeable distribution.
    Jul 4, 2012. 01:20 PM | 3 Likes Like |Link to Comment
  • The Market Says Morgan Stanley Is 'Junk' [View article]
    Financial Lexicon, if you are looking for a Morgan Stanley bond which reflects the junk status, check out their Maple bonds (i.e. 617446E70 Feb 2017). Trading at a big discount, despite having a make whole provision, favourable call provision, and a fairly high yield.

    Any thoughts on it? Arbitrage opportunity?
    Jun 25, 2012. 09:38 AM | Likes Like |Link to Comment
  • Is Buying A House A Good Investment Or Not? [View article]
    Skyler, good article, it is definitely thought-provoking. I think you underestimate the importance of mobility though. Labour mobility is a cornerstone of capitalism, and the lack thereof is a big reason the US has not come close to recovering after the financial crisis.

    If people are tied to a house (especially one that is "underwater") they are unable to take a job in another location. Businesses all over the US are saying that there is a shortage of skilled labour; this would not be the case if home ownership had not risen to such lofty levels (above 70%). When workers are mobile, they are able to move and take jobs where there skills are required rather than working in location where job options are limited.
    Jun 8, 2012. 09:32 AM | 2 Likes Like |Link to Comment
  • Canadian Housing Market Collapse: Part II [View article]
    Rodney, what's with using facts in your articles? Facts can be used to prove anything that's even remotely true. Conjecture and theorizing is good enough for every commenter on SA, why not the writers too?

    In all seriousness, it looks like you neglected talking about CMHC (Canada Mortgage and Housing Corporation), which is a big piece of the puzzle. For those non-Canadians, CMHC is a crown corporation which charges a fee to guarantee mortgages from the chartered banks. The banks likely won't take much of a hit, since they will be paid even if a borrower defaults (by CMHC, which is backed by...taxpayers). Sound a bit like the Fannie/Freddie fiasco?

    Having said that, Canadian banks are definitely preparing for tough times, cutting hours, letting people go, etc.

    Another thing to keep in mind is that real estate is local. Halifax's massive $25B shipbuilding contract means it is a prime location for years to come. Home builders, electricians, and pretty well and tradesperson will do very well for the foreseeable future as a result.

    A single-industry city like Prince George will have its fortunes rise and fall in line with the fluctuations of the timber industry. It's easy to say there is a bubble brewing in Canada. The hard part is to pick out where it is happening (other than TO and Van), and to identify unaffected regions.
    Feb 5, 2012. 11:48 AM | 2 Likes Like |Link to Comment
  • Bankruptcy Model Predictions About Research In Motion [View article]
    As a reminder to people reading this, do your own research. Andrew, what you failed to mention is that RIM has no long-term debt, and almost all of its liabilities are accounts payable, which are more than covered by the company's accounts receivable. The company has a nice stockpile of cash, no long-term debt, and is still profitable.

    Prem Watsa and Fairfax Financial picked up 14 million shares this week, as they see the company as undervalued. For those who do not know, Mr. Watsa is commonly referred to as the Warren Buffett of Canada.

    Andrew, the bankruptcy references are misleading. Having done your bankruptcy analysis, you should consider looking at the possibility of a turnaround, or calculate the liquidation value.

    Now is the time to start thinking about dipping your toes in and getting long, rather than running for the hills. Maybe it is a cigar butt investment, or maybe it will in fact turn around.

    Ask yourself why one of the world's premier value managers now owns more than 5% of the company. I will likely be buying RIM in the near future (although I currently own none).
    Jan 27, 2012. 03:57 PM | 3 Likes Like |Link to Comment
  • Forget The U.S. Market - Your Money May Be Safer In This Country [View article]
    You may not have seen it, but it did exist. From Bankruptcy Canada's website:

    "It means that it is no longer as easy to qualify for a mortgage as it was three years ago. Back during the housing boom (say in 2005, 2006, and 2007) you could get a mortgage with no money down, and you could stretch out the amortization for 40 years to reduce your monthly payment, meaning you could qualify for an even bigger home. You could continually refinance your home as house values increased."

    Source: http://bit.ly/v1r5eO

    You are right when you say there are safeguards (such as life insurance to cover a mortgage), but for a while there were not. Here is another article discussing no money down mortgages (albeit for investment properties).

    http://bit.ly/rOJ3gf
    Dec 30, 2011. 10:56 AM | Likes Like |Link to Comment
  • Forget The U.S. Market - Your Money May Be Safer In This Country [View article]
    "Canadian banks never loosened their lending standards back in the middle of the last decade." Actually, they did. No money down, 40-year amortization mortgages were around then, and only recently has the government done away with 35-year amortizations. 5% down for a mortgage is fairly standard, and could cause some trouble in the near future.

    For the past several months, nearly all the mutual fund managers and representatives I have met with have been saying that the US is the place to invest, that corporations have never had stronger balance sheets, etc. The grass is always greener on the other side I guess.
    Dec 29, 2011. 03:58 PM | Likes Like |Link to Comment
  • 6 Contrarian Picks For Big Profits In 2012 [View article]
    "It might be claimed that Apple's rise leaded to RIMM's fall."

    Appallingly bad writing. Leaded refers to gasoline.
    Dec 28, 2011. 03:16 PM | 2 Likes Like |Link to Comment
  • McDonald's Shows Clear Vision For Efficient Growth [View article]
    Brendan, have you spoken to any corporate insiders at the company? I have, and the consensus is that MCD is getting hammered on margins. Input prices have increased anywhere from 8-15% (for beef, buns, veggies, etc.) and the CEO has committed to price increases of no more than 2% a year.

    If the company has a mandate not to pass the cost increases on to customers, that means margin compression. I love the restaurant, but at a current valuation of 17x forward earnings, the stock is much too expensive.
    Dec 20, 2011. 10:16 AM | 1 Like Like |Link to Comment
  • Has Research In Motion Bottomed? [View article]
    Good comment, I am inclined to agree with you Badcop. With all the RIM vs Apple vs Google nonsense that people are spouting, I am amazed that nobody points to the Apple example of almost going out of business, then reinventing itself.

    That is a strong possibility (with new leadership, mind you) for a company that is profitable, has a solid amount of cash sitting in the bank, and no debt. Too many people refuse to look at the balance sheet. If they did, they would notice the 0 next to long term debt. It is difficult to go bankrupt when you have no debt.

    With that said, I will not be buying any RIM shares until I see a catalyst for price appreciation, or until the shares drop below their liquidation value.
    Dec 16, 2011. 03:29 PM | Likes Like |Link to Comment
  • RIM Looks Grim [View article]
    In terms of the way the company is run, market share, outdated technology, etc., RIM is a sell. In terms of its balance sheet, RIM is a screaming buy. It is a profitable business sitting on a pile of cash, and has no debt.

    I am not buying. The characters in charge are too short-sighted: a friend of mine (former RIM employee) left for a competitor when the stock was in the 60s. He said he wouldn't buy the stock with my money, let alone his own. There was no room for talent to move up, and the comany-wide feeling was that for all the employees' hard work, the only people benefiting were the executives. Not exactly the breeding grounds for a solid company.

    The Torch (a massive failure) was rushed out three months early because RIM did not want to lose a contract with Verizon. When you pump out garbage just to save a contract, bad things happen. Later Torches and devices were built upon this unfinished foundation of garbage, with the end result being a massive decrease in market share.
    Dec 16, 2011. 08:39 AM | 2 Likes Like |Link to Comment
  • Note To Apple Shareholders: Stop Trying To Spend The Company's Cash [View article]
    "I fail to see what Apple needs that it is not able to build themselves." Oops. How all of the hardware for the iPhone?

    Apple is currently sourcing its chips from Samsung, which is a competitor, and is currently sending Apple the second tier chips, keeping the first tier for Samsung's own phones.
    Dec 15, 2011. 03:41 PM | Likes Like |Link to Comment
  • Buy Shares Of Rogers Communications And Own Its Undervalued Sports And Media Segment [View article]
    I take serious issue with your statement that the assets Rogers just purchased in conjunction with Bell are undervalued. Ontario Teachers' Pension Plan (OTPP) sold Maple Leaf Sports Entertainment (MLSE) for close to double its appraised value. The deal did not include the real estate, which OTPP will continue to control through its RE branch Cadillac Fairview.

    A little bit of digging would have revealed that OTPP made out like bandits on this deal, getting a massive premium from the telecom oligopoly because Rogers and Bell are convinced they can "leverage" MLSE through their media channels. I'll believe it when I see it.

    A better title would have been "Buy Rogers Communication Because Canadians Pay the Highest Wireless Rates in the Developed World." Rogers is one of three firms operating in an oligopoly. That is why you buy them, not because they vastly overpaid for their assets.

    Your article has a sdcent synopsis of the holdings, but is severely lacking in analysis.
    Dec 15, 2011. 08:19 AM | Likes Like |Link to Comment
  • A Contrarian Play: Sell Gold, Buy REITs And Home Builders [View article]
    Point noted. I should have specified that they are yielding more than the REITs in the article. I am wary of a 17.28% yield, as high yields are generally a warning sign.
    Dec 14, 2011. 04:19 PM | Likes Like |Link to Comment
  • Bank Of America: Piercing Its 'Opaque' Balance Sheet [View article]
    Andrew, I suggest to you that the derivative assets are not the issue. If an entity is long a derivative (holding it as an asset), the outlay is the premium, which represents the total amount it could potentially lose. If an entity is short a derivative (holding it as a liability), the potential loss is unlimited.

    This is what should worry investors who are long BAC, not whether derivatives classified as assets become worthless.

    Nice to see facts mixed with opinion, as opposed to most of the articles on the site.
    Dec 14, 2011. 04:14 PM | Likes Like |Link to Comment
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