Intelligent Speculator

Quick summary of toda’s action for the names we follow
Baidu initiated as Hold by Mirae Asset Securities
Yahoo downgraded to hold by Clayton Moran
Motorola to replace Google by Bing for its phones in China
Microsoft Bing will sponsor the Simpsons
Research in Motion will enter the Brazil market
Eyeblaster ready for an IPO

Some quick news from today for the stocks that we follow here:

-Search market shares are out for February

Google 65,5% (+0,1%)
Yahoo 16.8% (-0.2%)
Bing 11.5% (+0.2%)
AOL 2.5% (0%)

-Google opens app store (competition to Apple’s Itunes store?)
-Google expects results in China negotations soon
-Netflix(NFLX) rated as “BUY” by Cannacord Adams analyst Jeff Rath

With the rapid growth of ETF’s and because of their superiority to mutual funds, fixed income ETF’s are gaining ground on other categories as they are a much cheaper alternative than what is currently available.  That being said, they are still fairly new and there will be many more options made available in the coming months. But I decided to take a look at the current top bond ETF’s, see what type of fees are being charged and what is available.

1-Different types: It is surprising to see how many treasury funds are available, they seem to form the majority of what is currently offered. There are also some inflation protected bonds, and a variety of corporate bonds.

2-Fees: Fees start off at .11% for BND, a Vanguard ETF that tracks the total bond market. I will need to do more research but this one looks to be the most interesting with such low fees. On the higher end, ProShares offers a 20 year treasury fund which costs almost 1% annualy (.95%), which is surprising since TLT (from Ishares) offers the same thing more or less for .15%!

3-Returns: In a year where stocks have been up and down, it has been a similar story for bond ETF’s and they have in fact all performed between -2,74% and 1.37%, a very narrow spread.

So without further wait, here are the top US Bond ETF’s by market cap:

Do any of these interest you??? Do you own any of these?

This week, some news in the tech arena as Apple announced the official date for the launch of the Ipad, while Google announced the acquisition of DocVerse as it continues the battle against Microsoft’s Office suite. There was also a lot of news on the Facebook front but I will likely be posting on that in the next few days so for now, I’m not touching that subject. I found it very interesting to see Apple(AAPL) rise so much on news confirming the date. I wasn’t sure if being long Apple was good since investors might have already fully priced the Ipad, but it looks like it wasn’t.

Here are other good reads I had this week:

-Investing in physical gold can cost you @ MoneyNing
-Notes from the 2009 Berkshire Hathayway annual report @ CanadianCapitalist
-How to bulletproof your portfolio @ TheFinancialBlogger
-To succeed financially you must know yourself @ MillionDollarJourney
-Stock Picks Galore @ StockTradingtogo
-What’s driving the Malaysia ETF @ ETFDB
-Yelp sued for extortion – again @ MarketingPilgrim
-High yield online savings accounts @ GatherLittlebyLittle
-End of week analysis (video) @ Alphatrends

I’m a bit sad to see the end of the 2010 Vancouver Olympics now hours away, I know that is what makes them special, but it just made for 2 incredible weeks filled with good moments, emotions, incredibly inspiring stories and more.

Without further wait, here are the best posts I had a chance of reading this week:

-Warren Buffet letter to Berkshire Investors @ ZeroHedge
-This is what it’s really like to work for Steve Cohen @ Clusterstock
-Iphone Money managements apps @ GreenPandaTreeHouse
-Investing without a plan @ TheFinancialBlogger
-The 2010 Dividend stock Ideas list @ DividendsValue
-5 ways to reduce financial clutter @ MillionDollarJourney
-What I like so much about making money online @ GatherLittlebyLittle
-S&P500 levels and analysis @ Alphatrends
-S&P500 analysis @ MyTradersJournal
-China’s new global M&A @ Forbes

What a great year of sports. The FIFA World Cup is now only a few years and the Vancouver Winter Olympics are now into their 2nd full week with a very big hockey match tonight (Canada vs USA). So yes, I have been doing a lot of tv watching in the past few days and I expect more of the same in the coming days.  But yes, I did still find some good readings and here they are:

-Greece has about 30 days to fund its next debt roll, will it make it? ZeroHedge posts about the European crisis
-Very well written post about using 60 minute charts and why it is irrelevant at AlphaTrends
-9 ways to multiply your your sources of income and pay off your debts at GatherLittlebyLittle
-A very interesting Morningstar studyon investor returns described and commented on at CanadianCapitalist
-Good ETF newsletter, I just signed up, you might want to check it out
-Think you can make money trading on news? EvilSpeculator thinks otherwise!
-Doctor Stock might have found trading success, you might want to go see how he is doing it!
-Good theme – Becoming a ninja of happiness at TheFinancialBlogger
-Solid results from the latest stock picks by Blain at StockTradingtoGo
-What my first job thought me at MillionDollarJourney

I’m not quite certain how Google executives and public relations are able to get some sleep as it seems like every day they are moving 100 miles/hour in an attempt to compete with all of its enemies. First up:

Google Buzz!

Launched as yet another attempt to better compete with Facebook & Twitter, Google Buzz launched amid a lot of turmoil and criticism because of many flaws. Most criticism around Google Buzz is geared towards its potential to help Google better compete in social media but also its flaws in regards to privacy protection. Stunningly, Google had made the default options very flawed. Google did not lose much time to answer back but damage had been done. Two things can be concluded in my opinion:

-Google did not do much testing on Google Buzz – Google has generally been a strong defender of privacy and I would assume that the mistakes made here were made not by choice but simply because Buzz was not tested enough to notice such flaws. Google does seem in a hurry to generate something to compete with Facebook/Twitter.
-Google Buzz is being talked about – To everyone that said Google Buzz had not shot, I would suggest looking at every technology media in the past few days. Turns out that Google Buzz is being talked about quite a bit and it is certainly good news for a company that to this day has been unable to generate anywhere near that word of mouth for its previous social attempt, Google Wave.

Google Docs

Interesting release from Google as they launched a series of template documents aimed to help brides and grooms to-be. You can take a look at their blog post explaining everything here. You can easily see how such tool kits can help Google Docs be more useful. Anyone who has planned a wedding knows how much planning is involved and having template for budgets, invitations, tables planning, timetables, and more can provide a huge help. With many people involved, having documents online for family members to view, modify and update saves many emails. Can you imagine sending an email to everyone involved each time someone new confirms their presence to the wedding?

Is it a major launch? No, of course not. But I expect that such launches provide the opportunity to showcase why users would gain by using cloud computing and more specifically, Google Docs. Long term, this is very positive.

Google Youtube

Did you hear about the tragic luge accident on the opening day of the Vancouver Winter Olympics? It is tragic, sad and spread all over the world in a matter of minutes thanks to social media. And where did everyone tune in to get the news & images? Youtube of course. It is gaining more and more power as the first source of news and for that reason, Youtube looks like an increasingly valuable property.

Google Aardvark

As Google continues its desperate search to become a major player in the social web, it just bought another small part of the puzzle, buying social search company Aardvark for $50 million. It is a cheap price of course but I continue to feel like Google is not taking the time to get this right and has instead been spending left and right trying to find an easy way into the market. Still too early to say if this will be a winner, but having Google Wave, Google Buzz, Google Aardvark as well as many other local and international initiatives certainly raises questions about Google’s strategy regarding social.

Overall conclusion

Overall a decent week for Google and generally positive because of all the attention that Google Buzz received but I will be anxious to see if Google can keep its momentum in the coming weeks… as for impacts on its stock, not much to report from the past few days, I remain comfortable being long the stock.

I wrote about it briefly in my financial ramblings on Friday, but it does look like there is a lot of risk of seeing a sovereign nation going down the road of a debt default in the next few months as quite a few countries (including the US) are seeing deficits spiraling out of control. The problem of course is that even one  such case, especially if it happened in a high profile country such as Greece could have effects throughout the world. Read any book that describes the recent financial crisis and you will usually hear that everything started getting out of control when Lehman Brothers went bankrupt. Is Greece going to be the start of a devastating domino effect??

Lehman and Greece both hid the truth for some time

Lehman Brothers said almost until the end that it was fine and there was no real issue or liquidity problem. Of course, Greece has been saying the same all along. For years, it used clever tricks from Investment Banks such as Goldman Sachs to “hide” how bad its financial situation truly was.  As the New York Times puts it:

“In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.”

Greece has a major ally

Of course, Greek is fortunate to have a major friend as the European Union has a lot riding on its member and that means having nations as powerful as Germany and France have an important stake in Greece. It is far from a given though that European countries will bail out Greece but you could easily make the case that without the EU, sovreign debt default risk (as measured by CDS spreads), Greece would be #1, and it is only at #10:

#10-Greece
#9-Lebanon
#8-Romania
#7-Lithuania
#6-Dubai/United Arab Emirates
#5-Iceland
#4-Latvia
#3-Argentina
#2-Venezuela
#1-Ukraine

Major impacts already

Remember how Lehman Brothers started hearing about market rumors of liquidity issues? This caused most counterparts to start lending to Lehman which in turn created more liquidity issues, and so on. Of course, even with Greece months away from these possible problems, things are already getting much tougher. Foreign institutions and banks have started charging higher rates to Greek banks and cutting off funds. This will of course not help the financial situation of the country. Could all of these talks of a possible default become self-fulfilling?

The Greek government might soon be helpless but for now it is doing its best to get an intervention from the EU: Greek Prime Minister George Papandreou – “There was lack of coordination among the various bodies of the EU — the Commission, the member states, the ECB — and even differences of opinion within these bodies,” he said. “All this has undermined our credibility even within the European Union … all this has not helped our position in the markets.”

Major Impacts in Europe and abroad

And these changes are already making things difficult for Europeans banks. The magazine The Economist puts it best:

“Steep downgrades of the sovereign-debt ratings of countries such as Portugal, Greece and Ireland would probably translate into immediate rating cuts for their banks, as well as higher capital charges on banks’ debt holdings and bigger haircuts when using this debt as collateral.

The consequences of even small changes in a bank’s borrowing costs can be extreme. JPMorgan, an investment bank, reckons that an increase of just 0.2 percentage points in the borrowing costs of British banks such as Lloyds Banking Group and Royal Bank of Scotland would trim their earnings by 8-11% next year”

So imagine if things got much worse and these banks saw capital costs rise by a few percentage points?

How to trade a possible Greek collapse?

Of course, the logical question now would be: “How do I profit from this situation”?

There are many different ways, although it is not as easy for individual investors:

#1-Trade sovereign debt of Greece, Italy, etc (this is much more difficult for individuals)
#2-Short the Euro through an FX trade
#3-ETF plays

As I wrote last week, it is not entirely clear if trading an FX or equity ETF is the best way to do this but here are a few ideas:

Vanguard European ETF (VGK)
CurrencyShares Euro Trust (FXE)

#4-Individual names

The best way to do this would be playing the scenario described by the economist, and trading individual European banks. Some of them such as Royal Bank of Scotland (RBS) are also traded on US markets which makes it an easier trade.

January was a very volatile month in the markets and it looks like many investors were trying to get out of large caps and since SPY is by far the biggest ETF, it is not shocking to see it at the top of the redemptions table. But to see it so far ahead certainly raises some questions. There are many things at play of course and institutional investors end of year movements probably played for a lot. For example, many investors do not want to hold too much cash at year-end since they need to report their holding so holding an ETF like SPY “alters reality” slightly to avoid looking under invested. But when January comes along, it becomes very easy to simply get out of the position.

Here are the most redeemed ETF’s in January:

But one thing I found very interesting was the fact that EEM was the 2nd most redeemed. Why so? Because if you look at the table of the most created ETF’s, VWO, the EEM equivalent from Vanguard is actually the most created, which would tend to indicate the fact that investors are finally catching on to the fact that I discussed last month when I compared the two emerging market ETF’s. This will eventually lead to IShares/Blackrock diminishing the fees on EEM but in the meantime, why would you buy or hold EEM?

And as we saw, with investors being fearful of risk and getting out of large caps (SPY), they have been moving towards bond ETF’s and seeing investors looking for ETF solutions to hedge inflation. Vanguard actually has 4 of the top 10 spots including the REIT ETF VNQ that I discussed last week.

Without further wait, here are the 10 most “created” ETF’s in January:

Good morning to you and welcome to the most important weekend of football and the biggest annual sports event in the world. The Super Bowl brings together die-hard fans (some passionnate enough to send a kid back home from school because he has the opponent’s team shirt on!), casual sports fans who do not watch all year long but are more than happy to see the Saints and Colts battle it out, but also all of those other fans who are either planning a Super Bowl party or attending one elsewhere.

Global Reach

I think that the Super Bowl’s real success is how it gets even non-fans to watch the game (the actual action lasts only 11 minutes according to a recent study). There is the spectacular half time show, the stars doing the national anthem but the incredible part is the commercials part. TV ads are an event in itself, something that is unmatched. Imagine being an advertiser. All year long you are running towards consumers trying to get them to see your ads. Then comes this 4 hour show where the audience is actually excited about seeing ads of their favourite brands. There are all kinds of theories about winning the Super Bowl ad game, but it seems clear that it is a unique opportunity for companies to get a good contact with their current and potential consumers. And it does not stop when the game ends. The best commercials will be seen by tens of millions of viewers after the Super Bowl on websites like Youtube. But the question of course is, are these ads worth it? They do cost millions of dollars to air.

Youtube could do more

I had written about this a while back but I think that Youtube certainly could generate a lot more money around the idea if it were one day able to create a similar type of event. There have been encouraging signs this year as Youtube has been more agressive in getting ad dollars related to the Super Bowl.

Imagine this, there are even studies that were done to see if there was a correlation between the Super Bowl winner and economic activity!

Betting also part of the Super Bowl

And finally, betting is a huge part of the game as well with fans betting on anything from the winner, to the winner of the coin toss or even how long Carrie Underwood’s (seen on the right) national anthem performance will be (over or under 1 minute and 42 seconds). Websites like Betfair will receive tens of millions of dollars of bets done around the world on every single detail that happens during the game.

And finally…foood!

Apart from perhaps Thanksgivings, the Super Bowl is one of the best days for grocery stores as clients come in to buy all kinds of healthy items such as chicken wings, beer, chips, soft drinks and more. Nothing like some great junk food in front of the Super Bowl right?

So that’s it for now, I hope you will all be able to enjoy the game, best of luck to everyone, as long as you are rooting for the Indianapolis Colts!:)