Intelligent Speculator

After the first quarter review, we were very proud to be at the top of the stock competition although we had a 4.33% return which was great compared to the main stock indexes but was not that exciting. It clearly proved that our picks had performed well under very adverse and difficult conditions. Three months later, we are now reviewing following a spectacular rebound by the stock market. And while we are no longer at the top of the rankings, our 43,32% return so far this year is still very much on top of our expectations. We are in quite a battle with Four-Pillars who currently sits on top with a 48,83% return.

Our top pick remains Baidu.com (BIDU), which as increased over 100% so far this year.

2nd off is Ebay which has returned 22.71% despite some very tough competition

While compared to others we had little exposure to oil, our USO pick has returned a decent 14.59%

And finally, our fourth pick, which has been disappointing but is still in positive grounds, GLD, at 5.39%

Here is the leaders board:

Sunday night, I had planned another post for today, but after seeing a report by 60 minutes about entrepreneur Greg Carr, I felt like I had to write about it. You see, I hear all too often about how some people think wealth is evil and leads to bad things. I feel like seeing a report like this can be a true inspiration. Why am I even talking about this? I have to admit it does not relate to investing. Or does it? A good investment, solid financial discpline can help us not only to have a great life filled with fulfilled dreams but also enables us to make a difference in the world. Not to get recognition but to make the world a better place. And apart from being happy and taking care of our family and friends, is there any better way to live? Every so often, I like to see, hear or read about a story like this one, where one person makes a difference in the world. I do not lack motivation or inspiration but there is no doubt that seeing stories like this gives me extra motivation.

It might not be possible for us to make a difference to the same degree that Greg Carr is able to make. But even helping out by donating time or money can make life out there just a little bit better. And isn’t that what life is really about? I certainly hope that one day I will be able to increase my contribution to the world. There are of course no bad ways to do that. So many good causes, so many ideas and so many problems to be resolved. There are so many good examples to follow and thankfully many of them have been getting good press, not for their egos, but because it inspires people like you and I to do more, and that might lead to something even bigger…

I don’t think there is much to add to this video, let’s keep investing and hopefully make good enough returns to make a difference in the world.. and thanks to 60 minutes for brining such an inspirational story…

-Can we still make money out of the stock market? By TFB
-Bad news from UBS..will the stock survive? By Zach!
-Budgeting simplified by MDJ!
-What is a good Beacon score? by TCT
-Interested in trade triangle technology? by BMSP
-How my parents saved 14,000$ on home repairs by GetRichSlowly
-Americans are saving again!! – New York Times
-We all have speanding weaknesses
-Congrats to the Four-Pillars for making it in the Globe and Mail’s best financial blogs list
-3 disastrous decisions when buying a house!

How ironic isn’t it?? I wrote a post a few weeks ago about The Pirate Bay being defiant in the face of authority both domestically and from abroad. Well one of the advantages of being in a democracy is that in theory you can always fight for what you believe is right. Many countries (including Canada) have political parties that fight for legalisation of specific drugs and when the Pirate Bay founders launched a political party (named… the Pirate Party), it certainly amused a few people that did not take them seriously. But guess what, they actually received 7.1% of the vote in Sweden, enough to earn them a seat in the European parliament. How ironic is that??

Rickard Falkvinge, the party leader, told the BBC the win was “gigantic” and that they were now negotiating with four different EU Parliamentary groups. “Last night, we gained political credibility,” said Mr Falkvinge. “People were not taken in by the establishment and we got political trust from the citizens.”I think this is just another proof of how difficult of a task it will be for lawmakers to control what is happening on the internet. In this case, it is almost impossible that the Pirate Party and its one vote could actually have an impact on changing European legislation. But on a national level in Sweden, it certainly is possible and in that case, there is not much that could be done by plaintiffs in the US or elsewhere. The problem is simply a lot more complex than most lawmakers make it to be.

The other solution for countries such as the US is to go after its citizens for using websites such as The Pirate Bay but legally that argument has been difficult to make. The US has gone after many gambling websites in similar cases but has been getting in trouble with international courts because it is not clear that the US has any power or authority over what happens on websites that are located offshores. It would be the same as the US trying to impose restrictions on what its citizens can do when they go abroad and visit a casino in Monte Carlo. The argument might be a little more difficult but generally that has been the comparison. And of course, the US government has no say over what happens in a Monte Carlo casino..

So what is your opinion about The Pirate Bay winning a parliant seat????

They are the new “in” thing in the world of high net worth individuals. Those that used to ask hedge fund managers to take their funds are now heading to a new safer and more transparent alternative; managed accounts.

What are they? It’s actually quite simple. Imagine you opened an account and did a deposit for 100K$. Then, you simply asked a fund manager to manage those funds. That is exactly what a managed account is.

The main advantage is transparency because you do see every transaction that goes through, there is no question about what is happening, how much it is worth, etc.

Also, when you think about the Madoff fraud, chances are very very high that no such scheme could have worked with managed accounts. Another advantage is that the investor holds the ultimate power and can at any point change what is happening in the account. Of course, the portfolio manager will probably stop his arrangement once that happens but it is still good reassurance. It is not quite clear how managers will react to this new tendancy, it does complicate things a little for them. But with set rules, managed accounts can actually provide a very good alternative for investors and in that regard, if managers can get more funds by going through such alternatives, they will probably go for it.

What about the fees? Generally, the fees are fairly similar to those that can be found under traditional hedge fund structures, generally similar to 1-20%, that is an annual 1% fee on the assets under management as well as 20% of the performance beyond an agreed minimum, generally the interests that could be earned if the assets were invested in money market…

Will traditional hedge funds disapear? Of course not. Many funds, especially those trading OTC trades would probably not be suitable or even possible. Because of this, managed accounts will have a limited potential. But given how small they currently are, it seems likely that managed accounts will have high growth for many years to come… By some estimates, managed accounts will grow at a 35% rate reaching $327 billions..  Because this type of account is fairly new, the race to see which broker and investment company will offer the more advanced, sophisticated and pratical solution is still very much up for grabs, we will be hearing about managed accounts a whole lot more in the coming years, that is one thing for certain.

So after 6 articles about Microsoft, the time has come to finally look at what this all means. To be certain, being a major company that dominated the computer world brought in a lot of companies whose main goal was to get back some market share in whatever way possible.

Seeing that, Microsoft started some pre-emptive strikes trying to gain some market ground in gaming, portable music players and search. But while it did have some early success in some including gaming for example, not much money has come out of these ventures so far. The XBox made an impressive run against Sony’s Playstation but was not prepared for a rivalry with the Nintendo WII. Other ventures such as the Zune have been draining the cash flow of the company with few future positive prospects.

But the more worrying part for Microsoft executives is that it is increasingly losing ground in its more vital and important business segments. While losing ground in the browser war has been hurting and certainly not positive as it searches for a more dominant place on the world wide web. But the critical battle will take place in a few months or years as many companies prepare to battle with Microsoft in the critical Office suite but even more critical is the prospect of Google’s Android entering in competition with Windows. Could it happen?? Unfortunately, it would be a major mistake to underestimate Google and Microsoft would know.

Know those ticking bombs that you see in movies all the time? Microsoft should be hearing it right now. It’s no secret. The only way that Microsoft manages to venture into all these different segments and get a reasonable shot with high quality products is because of the high cash flows that are generated through Microsoft Office and Microsoft Windows. If ever Google was able to build a viable solution to Microsoft’s products, it would probably be willing to offer its products for little offering a major incentive for corporations to start switching or at least have some negotiating power. And to Microsoft, that would be a major major problem. There is no going around, it could mean the end of Microsoft as we know it.

There are few alternatives in my opinion. Microsoft must pursue a few strategies:

#1-Improve its operating systems and office suite, it might only delay things but for Microsoft, that is the key
#2-Find a viable alternative income stream – Bing, Zune, etc, are good potentials. Microsoft should speed things up in both in terms of time and money in order to become comeptitive in other areas.

It’s too early to tell how things will end and right now Microsoft seems to know that they need a sense of urgency. I would be one who would certainly consider buying Microsoft right now simply because I would the company a 2-3 year span to generate some significant earnings out of its core business areas… What do you think? Any opinions on the matter?

Well, as you might have read in yesterday’s 6th article in my Microsoft series, I have recently became a fan of Microsoft’s new search engine, Bing and have even started using it as my default search engine, which is a surprise to me even really.. Searching while looking at images such as this one gives a whole other feeling in my opinion:)

Anyway, here are some of the best posts that I had a chance of reading this week on the Blogosphere:

-TheFinancialBlogger discusses 3 tricks to be more productive at work, don’t we all need these??:)
-Microsoft spending $11B on search????
-The Wild Investor discusses the drop of MySpace, which has been interesting especially when evaluating companies such as Facebook & Twitter.
-Should you join debts with your spouse? Read about it from TheCreditToolbox.com
-Funny how some people were angry at China a few years ago and now hoping that it can save GM!
-A review of an interesting book by MDJ: The Seven Rules of Wall Street
-Ideas for father day gifts, and frugal ones:)
-Signs of Recovery: Do We Needs More Stimulus?
-Ever heard of Freeganism??? Neither had I:)
-Recession vacations
-Great question: How much does a NYC bike messenger make???

Search.. A decade ago, search was probably not even considered an industry worth fighting for and with a dozen or so search engines such as Altavista, Lycos, and others, it was wide open. Now, it has evolved into a war of vital importance. The point is that as the world has became more and more digital, being the search engine has became something similar to the sun in our solar system; it is what the entire world web revolves around. And the truth is, after a decade of war between multiple competitors, many now call the competition a “Google monopoly”. No doubt, with a commanding lead in market share, Google has redefined the internet with many websites being built to viewed as best as possible by Google. And with search comes knowledge. No one in the industry comes close to the level of knowledge that Google now has. It can see trends, requests, and even find out where specific health problems originate and a lot more. What does that translate into? Money of course. If someone is buying a book and looking on Google, the company willing to pay up the most money will come out on top of search results, and that is worth a lot of money thanks to millions of searches every second.

Microsoft has been working hard and spending a lot of money trying to get back some market share. It dried revamping its search engine, made a bid to purchase Yahoo, and clearly has not been very successful as it continues to drop market share.. But that could now be changing. Microsoft(MSFT) has made a commitment which even by its standards is quite impressive. It completely changed its search business, renamed it “Bing”, and launched perhaps the most crucial product in a very long time. The search engine is young but has been impressive so far both in terms of capability, look and market share. It is far from being an immediate threat to Google of course, but it has the looks of a possible one. Especially when you consider that Microsoft is planning a budget of several billion dollars per year both for the promotion and improvement of Bing. Can it succeed where no other company has? I think it has a shot, which is more than anyone else has had in a long time. The most surprising is that Microsoft finally got rid of all those ads, links to other Microsoft services, etc that have hurt it for so long and has now gone for a clean design similar to the one Google has been using for years, just a bit cleaner looking in my opinion…!

It certainly looks like Microsoft has viewed the web as a war it cannot afford to lose and that is obviously bad news for Google. Will it succeed? Very difficult to say for now, but it is certainly not lacking the efforts or commitment..

Stay tuned for our conclusion on Monday about the fate of Microsoft…!

In this fourth article, we go towards another segment of Microsoft’s business, the gaming business. Seen as a way to enter a critical business, Microsoft built its entire business to compete with Sony’s Playstation and while it has managed to do just that, it has been outlasted it seems by Nintento’s WII. While Playstation and Xbox focused mainly on the market of gamers, usually young men, Nintendo has successfully made it into the general population targetting women and even young children. This has left both Sony and Microsoft in a bad shape.

The problem of course is that both companies were completely off guard and do not seem close to launching a competitor to the Wii. This also seems to be a problem for Microsoft who has been pulling out hoards of cash to be able to compete in the market. But with Nintendo having its unique platform and Sony using the high definition “Blu-Ray” standard to help its Playstation franchise, it is not quite clear what Microsoft’s angle will be in the next years to better compete.

Just two years ago, Microsoft seemed to finally have figured it out and even got over 50% of market share for a short time period. The problem is that is now falling behind again. Of course, it is not all negative as Microsoft finally was able to generate some profits from its gaming division. And perhaps the one thing that it has a slight advantage on is its XBox live platform that enables users the possbility of competing online, against each other. Competitors do have similar plans/set-ups but it does seem like Microsoft does have an advantage.

The real mesure of success of course will be to determine if Microsoft should change its target audience in the future. If it doesn’t, Nintendo will probably continue to dominate the market and it will be difficult to generate growth as Playstation and Microsoft battle it out in a much smaller market than it once was…

Another major problem is that when Microsoft started getting serious about the gaming industry, it was competing with Sony, which had high prices. The problem with Nintendo’s Wii is also that it is very agressive in its pricing policy. It is not clear that Microsoft would have entered this market if it had known it would be competing with sub 200$ systems such as the Wii. What will be Microsoft’s future in the gaming industry? Will it persevere?? What are your thoughts on the subject??

Google vs Microsoft… hundreds and hundreds of stories have been written about this great rivalry between the two giants, the “Good vs Evil” which Google certainly helped promote when it started promoting its “Do no evil” policy. It started out a long time ago when Google was a much smaller company that did not have power nor influence. Google became one of the main institutes to complain of Microsoft’s excessive use of its operating system monopoly and how it was using its power to illegally prevent innovation and take out competition.

Of course, when it comes to operating systemps, there is no secret, it is Microsoft’s life, its blood and what keeps the company so powerful. And Microsoft has certainly used its monopoly to launch and promote its products. And to this day, there is no true competition to Windows, the operating system used almost everywhere around the world. It is also what makes Microsoft able to pump money into its other ventures. There is no doubt that Microsoft cannot afford to let it slip away…

But things seem to be changing a little in the past few years… First, there was the gradual change in attitude towards “open source”, software that is used and and created by users, not for money. It is generally a lot more flexible and open.

And then, with the growing importance of “mobile”, a new familiar competition emerged as Google launched Android. It is an operating system that can compete with Windows for smartphones. That is worrying enough for Microsoft knowing how Google generally has success with its product launches. And now, news is out that Android will now be used on some smaller capacity computers, which is worrying on so many levels for the empire. Google has a history of offering great products for very low prices and with the high cost of operating systems, there is no doubt that any competition could force Microsoft to lower its prices and/or lose market share.

Of course, for any competition to be considered serious, the operating system would need to be:

-stable
-secure
-cheaper
-compatible with the majority of programs that currently exist

To be certain, the threat to Microsoft Windows is much greater with Android than it has ever been with MacIntosh operating systems and it is not clear what exactly Microsoft can do for now except hope that Google will not be up to the challenge, a strategy that has not proved successful in the past decade.