Russia has been at the center of attention in the past few months because of its major collapse. It’s no secret, Russia’s economy is centered more than perhaps any other major nation around oil. The recent recession hit hard in Russia as it decreased demand and prices. Recently, Russia has been on the defensive as it defends itself on many fronts. Most recently, US Vice-President Joe Biden spoke very openly about Russia’s demographic problems and about its impact over the next few years. While some countries such as Japan have been acting to improve their long term prospects, it seems as though Russia has so many problems that it does not quite know where to put its energy. You can read very interesting article about Russia’s demographic problems.
Another more short term problem for Russia is that its main customer, Europe is in very bad shape, a lot worse than the US in many respects and this could affect the Russian economy as it still depends on exports (as does Canada) for a major part of its economy.
While I do agree that energy prices will rebound and would fear being short Russia, I think that Canada will profit as well from a bump in natural gas and oil prices and overall has a much better current situation. As well, seeing Russia up almost twice the growth of the Canadian market so far in 2009 gives me a good feeling that this will be a promising trade.
The danger of course is that Russia being in many ways an emerging economy, its stock market might enjoy more growth in a context where the world economy would pick up. But since we still do believe that the recovery will be slow, we expect Canada to fare better.
So there you have it, Long EWC (Ishares Canada), Short RSX (Market Vectors, Russia)
Certainly an interesting debate and one that I have discussed in the past. Compensation discussions are too often simplified and things are often a lot more complex than could be thought initially. The man on the left, Andrew J. Hall, heads Citigroup’s energy-trading unit, Phibro LLC. There is currently a major discussion between him and the now government ran Citigroup. It’s easy to imagine Citigroup’s argument. They say that giving him $100 millions will draw a lot of public attention and bring back a lot of debates similar to what was said about AIG compensation and they do of course have a point. Signing a bonus check for $100 millions could easily make headlines and put Barack Obama and other public officials in hot water.
Another week comes to an end with hopefully some better weather in store.. summer is halfway done, unbelievable isn’t it?? Lots of action this week in terms of earnings and M&A activity, so lots of good readings to choose from. Here is my selection of the best ones!
I must say I’m shocked. I glanced at my screen and looked with interest at a news release about Amazon.com (AMZN) buying Zappos.com for about 928$ millions USD. To most non-Americans, Zappos is completely unknown. But in fact, the website was a small but fast growing competitor to Amazon. How is a shoe and clothes retailer competition to the specialised book retailer? Simply because Amazon has already said it believed that it could sell anything to anyone at some point in the future. The strength of Amazon lies in its powerful distribution network. Zappos on the other hand is much smaller but has experienced impressive growth thanks to what is probably the best customer service, online or even offline.
think for example that this merger would help Zappos gain a more important presence internationally very fast. They are now joining with one of two big ecommerce companies in the world (with Netflix) and that is certainly a positive.
Things could not be going better for Apple right? It just announced earnings that have once again beat earning estimates thanks to very strong sales of both Iphones and Mac computers. In after market trading, Apple’s stock gained about 4,5% as its highest margin product, the Iphone, pushed earnings higher. But all if not perfect in Apple world. In fact, it looks like it is not appreciative of Microsoft’s recent tv ads, that attack the higher price of Mac computers.
Should competitors ever ask themselves to stop attacking each other? Certainly does not sound like something a company would even consider in a capitalist world but that seems to be exactly what happened. I truly wonder if others such as Coca-Cola and Pepsi for example have ever had such discussions. I can’t imagine Microsoft ever deciding to stop a campaign for that reason, could you? Apple’s response is that Microsoft is giving false information quoting prices that are no longer accurate. Should such ads be allowed to go on? From the ads that I have seen, I don’t think there is any issue because Microsoft is simply saying that the Mac products are more expensive, which is…true.
Yahoo(YHOO) is “almost” officially toast..
It is now being reported that a new search deal is almost done. Among other things, this deal would set Bing as the search engine used by Yahoo. My question of course is what Yahoo will be focusing on if it cannot even have its own search engine. Other segments of the company such as dating and stores have also been losing market share to the point where it is unclear what Yahoo will look like one or two years from now. As part of the deal, Yahoo would retain most the sales responsibility for the new merged business. But in a world where Google is by far the dominant player, I doubt a few extra salesman will be what takes Yahoo to the next level.
Yahoo is currently up on the news in after hours trading and it might last for some time but I do think that this deal will hurt Yahoo in the long term, especially since this time around, Yahoo came into the negotiations in a position of weakness, a major difference from the last few times such discussions took place.
Oh and did I meantion that this deal will without any doubt be under scrutiny by the Department of Justice as this deal will take out on of the very few big players in online advertising. It probably will still get done but this will cost money, focus and time.
Does Yahoo look bad for not following Carl Icanh’s advice a few months ago when they could sell their company for over 30$ per share? Amazing isn’t it… Just name one good and promising part of Yahoo right now??? Yes, exactly, I didn’t think you’d come up with one.