21RPM - Views and comments on stuff

I went grocery shopping. Nearby we have one of those asian supermarkets TnT. In my basket I picked up some tomatoes which were ripened on the vine. I like their green onions. Over in the frozen section I grabbed some dim sum items which are always popular as well as some barbecued eel and fish balls. There was a sale on udon noodles so I decided to try some which I don’t normally buy. At the checkout the lineup was small. This locations I go to isn’t as busy as the others in vancouver which is nice. I paid for my groceries and proceeded to leave. As I drove away, I lit a stick of dynamite and blew up TnT. It went kabooom!

It was spectacular. Fruits, vegetables flew everywhere. Tomatoes on the walls. All the fresh sea food falling from the sky. Thousands of pieces of shrimp chips everywhere. The rear view mirror was raining food as I disappeared down the road.

The Smarties candy commercial is on. There’s blue ones. There’s yellow ones. There’s red ones. I just like how they got a bunch of young people to sing parts of the same song in their own different style. It’s a catchy tune. originally performed by Sly and the Family Stone called “Everyday people”. We are all everyday people. Unfortunately, some do not think so.

Today there was an Aryan Guard rally in downtown Calgary. It was reported that the group had been recruiting young people in schools with cd’s. Fifteen and eighteen year old teenagers “Kelsey” and “Meghan” were quoted as saying they “like being white” and that people are “taking it the wrong way”. Talk about brain washing at its best. Take advantage of the kids when they’re minds are most vulnerable to most any impressions. So if the group claims to only be promoting remembrance to european culture and heritage, why did they place an ad looking for more recruits from outside their own province even willing to cover their damage deposits.

The group was small but the backlash from anti-neoNazi groups was much larger in numbers. And everything happened on what was supposed to be “International Day to Eliminate Racism”. When I read this title, I interpret it as a day which does not support or promote any single race. Why the Aryan group chose this day is rather obvious.

I like smarties and I sometimes eat the red ones last.

I don’t know about you but when the president of the United States starts telling everyone that they should be buying stocks you have to wonder. If Warren Buffet was wrong just a few months ago when said the same thing and the market began to unravel last November, why should we listen to Obama who I suppose doesn’t make a living investing in the stock markets when the markets are still plunging downwards. Or maybe this is a good sign. When Buffet made the statement to buy stocks, he also went on to say that he expected another one or two major financial institutions to fail after Lehman’s had already done so.

Back to Obama, should we pour money into stocks now? In an interview with Jim Cramer on street.com his view is that any rallies in the bank stocks are only temporary and should be used as an exit point to get out while you can. This is because Geithner has not given americans enough detailed policies on how the US will not allow another bank to fail. Right now, they want the banks to go through a stress test for the next six months. The RRSP contribution deadline just passed and I wonder if anyone will do a survey on how much funds were contributed and into what investment vehicle.

Who knows. Maybe we should listen to Obama if Buffet was wrong before. People buy mutual funds based on whatever the bank salespeople recommend. And those recommendations tend not to reflect any specific market research. They only reflect the banks standard basket of funds so that they can make money off of you accompanied with the standard brochures depicting what $10k would look like in forty years or so. That is if the market goes according to plan.

18 billion dollars worth of trouble. Late last week I received a letter from HSBC advising me that the interest rate on the line of credit they offered me was going to jump up to prime plus 3%. Originally it was supposed to be prime plus 1 for the life of the account. Times have changed.

Reports over the weekend finally confirmed what I had been suspecting. Details of todays financial statement from the worlds largest european bank showed that huge losses have affected its income in the last quarter of 2008 and will probably continue to do so for 2009. They are also planning on holding a capital fund raising by issuing rights warrants at nearly half of fridays closing share price. However, those warrants are said to allow investors the option to convert or purchase twelve regular class shares for every five purchased.

HSBC had for a long time been considered one of the few stable financial institutions requiring no cash bailouts. Yet income has dropped over 60% and dividend payouts are expected to drop in the last quarter of 2009. HSBC is stopping all personal loans and mortgages in the US through their american division which has hit them with the largest portion of their losses. Business in China is also looking to slow down as China issued a statement saying that they are concerned about public unrest. They expect that close to 20 million people may become unemployed. This is a huge chunk of a growing population and will certainly show its affects in all areas of China’s economy.

Warren Buffet admitted on the weekend in a speech of his own mistakes in studying the markets as his own berkshire owned business have suffered far greater business losses than he had expected. He then went on to say that the US economy for the rest of 2009 will be in shambles.

For the above reasons, I still believe the share price of HSBC will continue to fall to at least the capital rights warrants issues price. Less than an hour to go and HSBC common share are down a little over 18%. Overnight in europe the share price dropped 22%. In Hong Kong trading was halted as the official financial statement and business plan was released. Tonight it’s shares will certainly drop in Hong Kong. Tomorrow we might see a small rebound before another leg down towards the $17 level.

Buying Put option strategies are the key for HSBC shares with returns over 150% if not more.

Now that the American Banks (and companies) have all announced further losses, more huge job cuts, closures and scandals, one can only assume that the asian markets will be hurt just as bad. Japan has already announced the same due to their heavy dependance on foreign sales and exports. It’ll be back to the 90’s for them.

• GM and Chrysler together ask for an additional 22 billion.

• Mining giant AngloAmerican announced it will layoff 19,000 people today.

• Saab gets creditor protection.

European banks have just started another round of banks breaking down and billion dollar losses. Note also that some european banks are already nationalized and have been since the last financial crisis. Many also argue that the US will have not choice but to nationalize its major lending institutions.

Many of the asian and real estate markets jumped on the real estate bubble band wagon following the North American market once it became saturated and mature. I know of many investors even from Canada who went overseas to invest in real estate markets outside of Canada. When the curtain falls, it will fall hard unfortunately. Properties in China had already reached level similar to North America in a country where many earn less than 1/4 of a canadian in a low income tax bracket. Real estate developments in Malaysia will suffer the same effect as rapid development everywhere will come to a standstill if not already. Meanwhile, Vancouver should count itself lucky as it prepares to host the Olympics in February 2010. It’s a huge party which Canada cannot afford to cancel.

France’s second largest bank Paribas announced huge losses directly from the continuing financial crisis. Whatever Obama does can barely slow things down as the stimulus plan will not provide relief for all the people with investment properties regardless of whether or not the property was bought for a quick flip or was to be rented out. With the previously rampant availability of credit, many average home dwellers jumped on the real estate bandwagon looking to cash in. Up until 2008 that is.

With job losses never before seen in my own lifetime at record highs and nearly 5 million people freshly unemployed in the US and counting, some have predicted this figure may double.

Its like a domino effect as today the North American exchanges will drop past eleven year lows. Countries tied heavily with the US will get dragged down sooner than others.

Initially I had thought that the world economy would recover faster because we’re in an electronic internet age. However on the flip side, the same technology combined with the extensive media access means that everything can crumble much faster as well.

I had a request yesterday from a friend. One of his clients had asked him for insight into how they could reduce the amount of paper being used by an engineering company by using computers with large monitors such. My friend had asked me because I used to be an engineer myself and might have a better understanding of the workflow in such an office. The client was preparing a report for the government. At first I was a bit hesitant to give him some info since, if his client was to go into any engineering firm in vancouver, they might charge them some flat rate for sitting down and ‘consulting’. Nevertheless, I gave him a quick discussion on what I think could be done.

These days, many engineering offices produce drawings on large sheets of paper for houses, plants, developments and such. Multiple revisions are constantly being sent out to all parties involved in any given project. This would include mechanical, electrical, geological, structural, architectural, city hall, the owners or clients, developers, and so on. Everyone needs to see the final layout of the project and drawings are produced for everyone at various stages in the project. So as you can imagine, a lot of paper gets printed and distributed. Each time this happens, the drawings are dated and sealed with an engineers professional seal of approval never mind the revisions.

Only during development do files get exchanged electronically so that the draftsperson or engineers and architects can do their development work on their computers. A project being proposed for development goes through multiple reviews and approval stages by city hall and each time this happens, hard copies are required. Then there are also the copies sent out and distributed at the actual job site for the contractors and suppliers to see.

On top of this, many ‘older’ engineers who came from the hand drafting era are still more accustomed to doing their work by hand instead of on a computer. Many of these people now have CAD people to enter in all their work electronically but not after a hard copy has been printed for them to mark up.

So how do we reduce paper use in an engineering office? That will be quite difficult. Until we can get all groups to approve some sort of electronically stamped engineers professional seal of approval, I’m afraid hard copies will continue to stay with us. The structural engineering office I worked with briefly was probably one of the most efficient and paperless ones around, many others would not be. We were a small crew and mostly younger engineers and drafts people. There was only one older engineer who had already started to migrate to the technological age and keep up with the times.

Everyone involved would have to be able to view all approved drawings and designs on a large screen computer and jobsites and client offices would have to have the software and connectivity to send and receive such files. These days, this should be quite easy with the available technology out there. Jobsites would then require portable laptops to be able to see the designs. Keeping those displays clean will be another issue outside the scope of this bog entry. The only issue which remains is still the ability to approve of some sort of electronic engineers seal of approval.

When my friend asked me this, I thought, they should look at this problem within the legal and government  field. If anyone wants to talk about wasted paper, thats where they should focus their efforts on. One property transaction can generate over one hundred and fifty pages in standard mumbo jumbo pertaining to property environmental, structural, financial and legal specifications.

So everyone by now has probably already heard of Nadya Suleman and her octuplets. This in addition to the six other children she already has bringing the total to 14 littles ones all for the tax payers to foot the bill for. She has a fifty thousand dollar outstanding student loan, receives food stamps between four and five hundreds dollars worth a month and doesn’t have a full time job.

People have called and complained about all of this and rightfully so. She’s no Angelina Jolie with her herd of children since well, Angelina Jolie can actually afford it. She also didn’t conceive all her children as most of hers were adopted.

Now what I am wondering is what about the fertility doctor that helped her to accomplish such a feet. I thought doctors are supposed to abide by a code of ethics and show some sort of common sense being the highly educated people that they are supposed to be. He could have simply refused to perform the operation except that some would argue that Nadya would then have just found another doctor. I don’t know if the medical system down there is advanced enough to have everyone on a common medical database.

Regardless, this fertility doctor could not have mistaken one egg for eight under that high powered transmission microscope. Science is too precise for that to be a hapless error. The only thing which could have driven the doctor to do this is the blind will to provide whatever the patient/client requested no matter how absurd it may be. They should have done some sort of income and personal situation screen test to see if there was even a father to help support so many kids or some sort of background check. It probably wouldn’t have been too difficult to find out that she already had six children to begin with.

Other’s could then argue that it would be against some human charter of rights to restrict her freedom to have children but at what point does having 14 kids cross the line of being just plain stupid in this day and age given her situation.

For those that continue to argue to support her cause and send her well wishes, have they forgotten that the rapidly growing population of our human race as we devour our smaller and smaller planet earth and all the resources it has provided. Why bother trying to save our planet? We have only ourselves to blame.

Back when farming was a popular occupation, families prided themselves on having lots of offsprings to show wealth and abundance. The more you have, the more to help. Those days are over and civilization has changed.

One only has to take a look at Google earth to see the magnitude of the human race as we spread, everywhere.

Obama’s move to limit salaries and bonuses for companies receiving taxpayer funds seems like a no brainer in the political popularity game and one wonders why it was never put in place in the beginning. Why are such high salaries expected by executives when they’ve allowed their companies to get into so much trouble. One could argue that they their pay must reflect their huge responsibility, company performance from previous years or keeping up with market inflation yet they never get penalized for poor performance.

While some argue that this will cause high talent to go elsewhere, I tend to disagree in an economic depression. With so many companies facing financial problems, I’m sure someone will be happy to take a five hundred thousand dollar salary away from someone else and probably do a half descent job. Those that want to receive high salaries elsewhere would have to wonder where are they going to go? Most of the other major financial companies and institutions are also feeling the pinch and probably not thinking about expanding their executive staffing levels.

High priced talent doesn’t always result in success. I can think of one company as an example. When Nortel crumbled back in 2001 during the dot.com market bust, they ran into accounting problems. Nortel went through a few seemingly worthy candidates with no positive results. They could have thrown all the money they had at the best and the brightest and the most experienced but it probably would not have made a difference. The reason is the market was not willing to throw huge sums of money at them in the form of new orders and contracts.

With the current economic crisis spread across so many sectors, fresh liquidity and spending required to quickly grow business is highly unlikely. If banks continue to hoard their funds, purchase executive jets *cough* citigroup *cough*, make borrowing difficult for even creditworthy customers at higher than expected rates, the little guy at the bottom doesn’t stand a chance. Foreclosures continue and are starting to affect regions which were thought to be strong.

January is over and the job toll for the first month of 2009 continues. Every few days another company announces tens of thousands of job cuts. Most of these people will become the burden of tax payers and most of them will probably not be able to find similar level paying jobs right away. Depressions tend to take a while to get out of the last I heard.

So who wants a $500k a year job?

Last week I sold the BAIDU $120 JAN 17th PUT OPTIONS just a couple of days before they expired for a tidy sum. I averaged approximately 50%. Option contracts expire on the third friday of every month. My goal was to only trade them. I had no intentions of exercising them even if they were ‘in the money’. However, I believe there is still more room. The stock hasn’t reached my ultimate goal of somewhere between $75 and $80. The stock currently sits around $111 today.

Shortly after, I bought some HSBC $35 FEB 21st PUT OPTIONS. When I heard that this week would be the beginning of earnings releases combined with the current economic crisis, I figured that the financials would take another big hit along with everything else.

Another reason I chose this bank stock instead of the other american bank stocks is that HSBC’s price was still around $42. Many of the large american institutions have already fallen into the twenties and well below. The $35 FEB21 PUT OPTION’s were very conservatively or cheaply priced at $1.85 per contract. After todays dramatic drop, the option contract has more than doubled in value returning over 126% since last thursday. There is still much more room for this stock to drop as HSBC has arms in every major economic country that is being hit hard right now. The eventual target is expected to be somewhere in the low twenties or high teens.

The markets started dropping overnight in Asia all thanks to the Royal Bank of Scotland’s earnings release which showed a loss of $28 billion pounds. This whole week will be a continuous stream of poor earnings announcements from large financial institutions and tech companies.

• Bank of America to post first loss in its history and is proposing another 4000 in layoffs.
• CitiGroup earnings to drop significantly.
• HSBC was recommended a ‘SELL’ on monday.
• Nortel filed for bankruptcy last week.
• Google drops Ad placement program.
• Regional Financial Corp sees over $6 billion in 4th quarter losses.
• Intel cuts prices of its processors.
• State Street reports significantly higher losses.
• Wells Fargo drops on earnings fears.
• Merrill Lynch loses 15 billion.
• Circuit City went bankrupt last week.

I don’t think I’ll bother listing all the others. Oh and I almost forgot. Congradulations Obama. Enjoy the party today while it lasts. You’ve got a huge job in front of you.

This blog entry is just about four years too late. So while you are reading this, please pretend that you are back in 2005. I didn’t realize this until the other day but thanks to YouTube, one of my all time favourite bands consisting of Bono, Edge, Larry Mullen Jr. and Adam Clayton was inducted into the Rock and Roll Hall of Fame. Broadcast on VH1 in the states, the footage which has been taken off of YouTube due to contract disagreements between Google and the media companies, U2 entered the elite group of rock legends as soon as they became eligible.

This should be no surprise as they still tour the globe and put out great albums after all these years. Although I do admit that they sort of lost me for about six to eight years after Rattle and Hum. The end of that world tour had seen the show morph from the Zooropa album into the Popmart show and the bands persona had changed from good to a bit weird. I think Bono got carried away with playing his on stage characters.

It wasn’t until 2004 when they came back with the album ‘How to Dismantle a Time Bomb’ that I recently started to listen to their new material. Albeit, almost five years after it was released and thanks to YouTube. The world tour in 2005 was their biggest apparently. I think U2 probably still has the best live performances because even during a lesser known song which you wouldn’t normally hear on the radio, you will still be bombarded with a huge array of cool images and graphics which their concerts became well known for. You could take any one of the millions of images they’ve splashed across the screen and make a t-shirt out of all of them. I’d buy, most of them if I could. One for each day of my life. Who needs to do laundry with so much clothes?

Stage designs were of monstrous proportions almost no other band or performer has bothered to put together in a similar fashion for their own shows. The 2001 tour in support of the album “All that you leave behind” featured the same impressive set up but with an arc in the shape of a heart. This arc extended out into the audience and allowed the Bono, Edge and the rest to run pretty deep into the crowd in a way without touching the ground below. The heart became just a round circle and all the giant flat panel screens which used up so much power through all those years were replaced with a much more energy conserving curtains of LED lamps. These lights hung from rafters extending from the stage up into the sky light skyscrapers as they were meant to depict the theme of the song “City of Blinding Lights” on their most recent tour. This latest set up is probably the easiest for them to set up, tear down, move, and program whatever messages and images they wanted.

City of Blinding Lights - Photo by Joe Pugliese

Their induction into the Rock n Roll Hall of Fame occurred just after midnight at the famed Waldorf Astoria hotel in New York. Bruce Springsteen gave the welcome speech for U2 as Bono had done for Bruce Springsteen when he himself was inducted back in 1999.

• Induction Speech by Bruce Springsteen Part 1
• Induction Speech by Bruce Springsteen Part 2

The evening was capped off by a four song mini set which included They played Vertigo, ‘I Still haven’t found what I’m looking for‘ with Bruce Springsteen, Pride(In the Name of Love) and ‘Until the End of the World’.

Some other interesting info which I came across. Someone on YouTube actually went to Bono’s house in Ireland. All they saw was the giant iron gates and you could not see inside through the gates and the surrounding stone walls. After milling about for a couple of minutes, the intercom came on and the security staff asked the people to go away.

Bono is also a featured columnist at the New York Times. They just published an article about how Bono thinks that Frank Sinatra’s voice does not have ’sentimentality’.