Tim Hortons is a major player on its own field in Canada and has slowly been gaining ground in the US since its recent spinoff from Wendy’s over a year ago. For those who do not know about it, they are basically similar to Dunkin Donut’s but they quickly crushed their competition. Basically, Tim Hortons is known for its coffee and for its healthy fast food, mainly around sandwiches and soups. They have dominated the market in Canada so much to even become a symbol of Canada and something that Canadiens are proud of. Of course, McDonald’s is a major player in the fast food as it is everywhere else. But it now seems ready to act on Tim Horton’s and is putting up a major offensive on two fronts.

First off, McDonald’s has started ad campaigns that look awfully like the ones Tim Hortons would look like, around Canadian themes like hockey, family, etc. You watch the ad and feel like it is Tim Hortons and then they break it that it is actually McDonalds. Agressive? Yes, but nothing that would not be expected.

The major difference of course is the 2nd part of this campaign as McDonald’s announced it would be giving out coffee for 2 weeks in the mornings, not with any purchase, free, plain and simple. That is what I would call a major move that will be costly but could actually change the marketplace as they will succeed in having clients taste their coffee. Of course the whole point of the game will be to retain the clients and keep them after the free period.. can they do it? Hard to say but I think most Canadians will give them a shot.

Think this is not critical for THI? Figure this.. 45% of sales by Tim Hortons originate from coffee, which holds 70% of the morning coffee market share with McDonald’s holding only 10%, a very very distant future…

It will be very interesting to see how the Tim Hortons stock reacts in the next few days. There had been rumors about this attack and so the THI stock had already suffered a bit, but with details coming out, it is clearly a dangerous campaign for Tim Hortons. And I would personally not want to hold any THI stock going into Monday trading…

It was a CRAZY week, but I finally had some time to settle down, here are the most interesting posts I read this week:)

BuyMyStockPicks presents How high can Apple go?

TFB presents How to make money with cash reward credit cards

MDJ on the 80/20 rule and how it applies to us (one of my favourite rules really)

Zach presents another very interesting view on Citigroup’s stock!

I have been and still am bullish on gold, but the Wild Investor looks into Gold being doomed?

Financial Nut looks into rolling our 401K!

I always find the ownership debate a bit one sided so this post by the Young and the Frugal was a great read!

Remember a few years ago when sovereign wealth funds made the news? They started a couple of decades ago but started to gain popularity and power only about 5-10 years ago. As time went by, they started diversifying their investments and going into private placements and taking important stakes for economic but also strategic reasons. The Chinese and middle eastern funds were the most active and raised the most attention. This culminated into a huge controversy in 2006 when the Dubai Ports Authority made an offer to buy six major US ports. The US government raised major issues with the transaction mostly because of security issues. And while those might have been legitimate, I think we all agree that there probably would have been no problem if a UK fund had been at the other end. In any case, this was a clear signal that sovereign wealth funds were not welcome under all circumstances and would have to subject themselves to more transparency than they were required by law to provide.

As the current economic crisis evolved, it became clear that these funds could have a useful role as they took important stakes in Western banks, mostly through big private placements. They started to be seen under a more favourable light and suddenly, their lack of transparency or motives became less relevant. Funny how that works isn’t it?

Last week saw another more important move on that front. As sovereign funds (SWF’s) have stepped back a bit from these major investments to avoid big losses, they are now being seen as an important way out of the current crisis. The governments are not asking them for any questions now it seems and have shifted to ask for money instead. “Britain would welcome investments by sovereign wealth funds to bolster its economy”, Business Secretary Peter Mandelson said on Wednesday. Funny how that works isn’t it? They are now being seen as an easy way to get liquidity into the system and have less downside than government debt issuance. The question of course is if these funds will step in and if they do, will the governments remember all of these contributions and help when things start to rebound?

I would personally think that the SWF’s will be investing more funds but they will be monitoring things very closely and could easily move things around and not come back if the governments do not lay off a bit when the economy gets back on its feet.

The past few months have been very interesting ones for anyone involved in sea transportation, especially those using routes close to the East coast of Africa. Increasingly, pirates, a group most thought had gone bankrupt years ago are fighting back.

They started out their expansion plans with a clear plan, going after numbers. Simply hire a low paid crew to take over ships, then ask for a ransom in exchange for the boat and everyone onboard. While they had limited equiptment to start off with, they have been reinvesting 20% of their ransoms according to their reports in order to acquire high tech GPS equipments but also increasingly impressive warfare in order to take bigger and bigger ships.

The Kenya government estimates that the Somali pirates were able to collect $150 millions in ransomes in 2008, not a bad number and a clear increase over the 2007 numbers. Thanks to their increasingly sophisticated equipment, the pirates are now also able to connect through high tech means such as the internet and text messaging that have enabled them to improve the efficiency of their operations.

There are some downsides to this investment though, here are a few:

1-They might have increased their size too quickly as they now seem to draw attention from US and other military groups that are looking to end or curve this serious problem. China is another country that seems to be increasingly concerned with the pirates

2-Unfortunately, it is very difficult to get any kind of verification of the financials as the pirates have generally not accepted any auditing of their books

3-Currently, the pirates have not diversified across the world making it too easy for military groups to limit their expansion. We will be looking into future conference text messages with pirate chiefs to determine if they have any plans related to this.

4-Given the very low cost of life, we are uncertain of the level of motivation for the pirates as they clearly have amassed enough money to slow down their operations while US military ships are out for them. We expect the 2009 Q3 and Q4 numbers to experience pressure with a return to full operations only in 2010.

One potential area of growth for the pirates is “pirate insurance”. They could charge a fixed fee for any boat going through the region that prefers not being attacked. This could even make life easier as such boats would require no work apart from collecting the fees.

If you wish to know more about the operations and perhaps place an initial investment, we recommend taking a cruise through the Gulf of Aden, you should be able to get in contact with pirates within a few hours….good luck!

Carnival of Personal Finance #199

The Financial Blogger presents Looking to buy a new car

Wild Investors presents Why Would I Want More Than One Broker?

I agree with Zach that the uptick rule is somewhat a joke

Interesting strategy from MDJ about how to save more

Financial nut is getting ahead through his side business

Bankergirl presents Financial, Personal, and Professional Growth

BuyMyStockPicks presents Forex…is the British Pound making a reversal?

So even Somali pirates are now getting smart enough to reinvest???