China's Old Men - Truth or Dare?

If a lion could talk, we wouldn't be able to understand it.
Wittgenstein, Philosophy of Psychology - A Fragment, Sec. 327

Those public demonstrations must be pretty bad in Hong Kong, as they even climbed to the top of the Canadian news cycle today. The paper mache Goddess of Democracy ought to be making it's appearance about anytime now. The Oracle of Ottawa is really enjoying watching China's old men twist. This ain't 1989 Dear Reader! There is so much more at stake at the time of this writing. Back in 1989 China did not have access to the massive and gullible capital markets of the Western Free World.

China's old men - trapped by the ideological balls?

Why it was only last week that Jack 'Forrest Gump' Ma hit up the New York Stock Exchange for over twenty billion real American dollars in that monster Variable Interest Entity IPO of the previously unknown Alibaba electronic bulletin board! The Oracle of Ottawa spent all the week before it went public to inform investors to beware, and that it was really only a two dollar preferred debt offering. Of course the Oracle of Ottawa caught a ton of heat online about it, but come tomorrow we will soon see who was right won't we?

The real question here Dear Reader, is Truth or Dare, Money or Power? Will the demented old peasants of China's corrupt and inbred politburo stomp the citizens of Hong Kong in the social and journalistic media light of the world like they did in Bejing in 1989? And if they did what will be the opening prices of all the Chinese variable interest entities that trade at present on the New York Stock Exchange, come the opening bell on Monday morning?

It is real ignorant, real world irony, of classical proportions that the option chains on Alibaba start trading tomorrow morning! And the Oracle of Ottawa's feelers went all fuzzy, when it was reported  on CNBC last week that some unknown hedge fund laid a huge short position on Alibaba, of 2.4 - 3.6% ! of the outstanding issue. Someone is real cocky or perhaps very well informed, perhaps a bunch of merchant banks from Hong Kong perhaps?

There were many reports about how many Chinese politburo members were "partners" in the last Alibaba IPO. Do you really think they are going to risk all that loot for the sake of a municipal election in Hong Kong? Will the old Chinese men cut the nose off of their very lost faces for mere ideological purity? The Oracle of Ottawa has heard that the Chinese can eat damn near anything, but ideology? Perhaps with a black bean sauce and some Deer Penis Wine...?

Stock Picking - A Nine Factor Model

Our decisions matter. We can change the world. Keynes economic prescriptions reveal that as we make decisions we do change the world.
Peter L. Bernstein, Against The Gods - The Remarkable Story Of Risk, p. 230

At the time of this writing there are 3,860 securities to pick from in Canada on the Consolidated Toronto Stock Exchange. If you live in the United States there are way over 10,000 securities to choose from on the three major markets. If you go into the pink sheets there are several thousand more to choose from. And the Oracle of Ottawa has heard that there is a ton of low hanging fruit still to be found on any given day.

Just Roll'em...

The Oracle of Ottawa cannot tell his Dear Readers from around the world, how many times he has held his fresh, new and very expensive copy of Investments by Bodie, Kane and Marcus in his left hand and his latest brokerage statement in his right hand only to be told by the standard book that what I did last month is totally impossible! Some day the Oracle of Ottawa is going to read that book and do it the "right way", but not today.

As a public service to my Dear Readers from around the world, the Oracle of Ottawa has decided that he is going to share with you basically how he picks a stock. It is a nine factor model of data that is commonly available on the internet for free. The Oracle of Ottawa has never paid for investment advice in his life, and neither should you Dear Reader.I will present my nine favorite factors with a link that will take into more detail. And some brief comments, that I have learned from having my own skin in the game for a number of years.

1./ Share Price: The lower the better! Contrary to the assumed wisdom, you will not make very much from buying Apple at over $500.00 a share. The Oracle of Ottawa has found that the sweet spot is between two to ten dollars a share. As a matter of fact my first ten bagger was on a two dollar stock. The Oracle of Ottawa loves two dollar stocks. If you are tempted to follow the crowd, ask yourself, what will double first, a two dollar stock or a one hundred dollar stock? Think about it.

2./ Price/Earnings: Lower the better. Buy a dollars worth of earnings for as little as possible. There is no law against it, and forget the textbook.

3./ Dividend Rate: The higher the better. New studies by the people of the book have recently found that that high yielding stocks do the best! Never buy a stock in a company that doesn't comp you with a nice fat rate for just waiting. Contrary to the book, high yields abound in the markets, all you have to do is discover them. And yes there are many free lunches to be had in capitalism, Who knew?

4./ Price/Sales: The lower the better. A low price sales ratio is a great indication of vigor. In Canada it is not uncommon to find price sales ratios way under 1.00. Would you believe 0.05 to 0.50 is pretty common? It is.

5./ Price/Book: The lower the better. There is nothing wrong with buying a dollar for fifty cents or even less. And contrary to the text book, these stocks are still out there in the market waiting to be discovered. So much for the Efficient Markets Hypothesis!   

6./ Volume: The higher the better. Steadily rising daily volume is very bullish from my experience.

7./ News: More positive news the better. A company with a clearly defined mission is very bullish indeed.

8./ Price/Cash Flow: The lower the better. (See the link...) The more money that is flowing through the company the better. A low ratio indicates wicked vigor.

9./ Beta: Doesn't make any difference. Beta is a lot like mutual fund performance. Past history is no indication of future performance. Trust the Oracle on this one. The Beta of a stock has made no difference to the Oracles historical performance. Don't let it get in your way.

The Oracle of Ottawa hopes that this will perform a much needed public service. And be very wary of academics who write about stocks and even win the Nobel Prize, and yet have never owned a stock in their own name in their life! Read their books for a laugh, then study the people who have actually went out and did it. You can't go wrong with those guys.

Discovering Thomas Piketty

It is obvious that lack of adequate investment in training can exclude entire social groups from the benefits of economic growth.
Thomas Piketty, CAPITAL in the Twenty - First Century, p. 22

The Oracle of Ottawa first came across Thomas Piketty at his local Chapters retailer. There was a dozen  brand new hard cover copies of Capital in the philosophy section. Go figure, the Oracle of Ottawa can only surmise that Heather Reisman does not want what is between the covers to become common knowledge in Canada. The book is beautifully printed by the same publisher that published the works of John Rawls, Harvard Press. At just under 700 pages it could also hold up a pretty large window or stop a very large door.

Thomas Piketty at Cambridge...

The Oracle knows that the main push of the book is about economic inequality, but the Oracle of Ottawa bought the book for the insights into the actual mechanics of capitalism itself. As an avid stock picker you can't know too much about the actual workings of capitalism.The writing style is very easy to read and absorb.The two laws of capitalism are worth the price of the book.

At the time of this writing Capital is number two in Amazons Top 100 Books list! It was number one until just recently. It has come up in the Province of Ontario election already. Which is not hard to understand, since Kathleen Wynne is no doubt an avid reader. The NDP were too busy singing Koom By Ya and the Conservatives never read books at any time, hence Kathleen Wynne has a pretty big edge with this monster tome under her belt.

This Thomas Piketty lad has learned all about academia very young. He got his Phd. at the age of twenty two! He was awarded the prize for the most promising young economist in France in 2002. Just come up with a theory that cannot be entirely proved or disproved. You get to be a legend by default. Just like Sigmund Freud. Whatever works....

The Oracle of Ottawa's favorite economists are John Maynard Keynes and Karl Marx, as all my many international readers already know. They too were fascinated with wealth and inequality. They were also obsessed with how wealth was created. And to study the acquisition of wealth they actually tried it themselves. Especially John Maynard Keynes. He got so good at it that his original portfolio is still compounding in timeless bliss at Cambridge. There was never any doubt about Keynes, he had a ton of his own skin in the game all his life. Thomas Piketty should try that, maybe his next book will be about as long as The General Theory instead of the length of Das Kapital Buch Ein....

When To Sell A Stock

" investment is grounded on the past whereas speculation looks primarily to the future."
Benjamin Graham, David Dodd, Security Analysis - Principles And Technique, p. 66

When the Oracle of Ottawa bought his first stock he was called a fool, then later on, having survived and thrived, he was called lucky, continuing on until the time of this writing, people just call the Oracle of Ottawa "Sir". As mentioned many times before in this humble blog, stocks have been very good to the Oracle of Ottawa. Now the Oracle of Ottawa is not Warren Buffet, nor does he ever want to be. The Oracle of Ottawa has no desire to be listed as one of the richest Canadians. The Oracle of Ottawa just wants to enjoy a benevolent level of prosperity, read all the books he has never read, so far, and write the truth to power in his blog, completely unowned by any corporate whore.

Capitalism? Nuttin' to it!

Right from the start the Oracle of Ottawa had no trouble on what and when to buy. There is a ton of literature and success stories on that. The Oracle of Ottawa is an old time value investor. He simply seeks a stock that is priced at or below its book value, between two and ten dollars and  with a P/E ratio of less than 10, with a dividend between 2 and 55 percent and recently, a P/S ratio less then 3. The Oracle picks one stock every month, which he calls "Stock of the Month". Been doing it for years and years.

Soon the Oracle of Ottawa had a pretty wacking portfolio of stocks very deep into the money. But the great Oracle sweated on when to sell a stock. The Oracle of Ottawa found the decision to sell much much harder then the decision to buy. Oddly enough, every one else the Oracle knows, has the same problem in reverse. They always sell a double right away and sweat about what to buy next.  Don't be like everyone else. Taking a mere double will never make you rich. The Oracle discovered that buy and hold is still very powerful, and that it is not unusual to get a ten to fifteen bagger! Ya, you read that right, 1,000 to 1,500 percent profit is not out of the ordinary with the Oracle of Ottawa.

Then, after much gifted thought, as the Oracle of Ottawa is an "85", he realized that it could all be reduced to a simple rule of thumb (ROT), or what the undergraduate text books refer to as heuristics. And the rule of thumb is: NEVER OWN A STOCK YOU WOULDN'T BUY. When the statement arrives at the end of the month, the Oracle lists all his stocks in the money by percentage difference of book to market value. Then he lists the top 19 stocks in order for the month past. Yeah it does take a while to do it by hand, especially when you own way over 100 different stocks!  Then you go through the list checking the fundamentals on your favorite quote sight, and you sell the stock that has gained the most, but appears to be at the point of being unsustainable. i.e. Sell that stock that you presently own, but would never buy.

The Oracle of Ottawa will provide a simple example of two stocks. One is a very large REIT that the Oracle purchased many years ago when it was not a very large REIT. He paid $2.60 a share at the time. Today the REIT is one of the TSX 300 stocks, and is selling for nearly $27.00 a share. Another ten bagger. But it is still paying a monthly dividend with an annual yield of nearly 7 % ! And its P/E ratio is under 7! Aside from the price, this is still a value stock. Keep this one. Now going done the list, the Oracle sees that he has another stock that he bought for around two bucks that is now pushing 15 bucks a share, and the dividend yield is only a lousy 1.4%, and worst of all it is at 100 times earnings. The Oracle will sell this stock as soon as possible. It is now a growth, momentum darling. Never Own A Stock You Wouldn't Buy! Get it?

Sheeple - You Gotta Love Them

The Bible invariably uses the sheep as the typical apocalyptic or ideal animal. I suggested in one of my books that the reason for that is that sheep societies are perhaps more like human societies than those of any other animal: because the sheep is gregarious, stupid, and easily stampeded.
Northrop Frye, Symbolism In The Bible, Lecture 4, p. 47

Well Dear Reader, it is that time of year again in the Western World. The coming end of the year holidays known as Christmas And New Years. This used to be the time of the year that the Sheeple used to drive the Oracle of Ottawa just crazy. You know the standard aggravations. Joe the Chinese peasant that tries to back into his parking spot at the mall and takes the doors and mirrors off your brand new car. Or some pathetic trot that whips out a debit card to buy a newspaper and a pack of gum. The Oracle of Ottawa could go on and on, but he won't.

Sheeple - Learn to love them....

It was just recently that the Oracle of Ottawa has had another bit of profit from his ongoing thinking about thinking project, and that is that you must come to learn to love the Sheeple. There is simply no percentage in getting all Agent Smith with them. Yes they are a disease, a virus, and they do have a lingering odor, that can really get on your nerves. But the Sheeple at the end of the day have many very important qualities. The most important of them is that Sheeple constantly want things, and there is no way to reason with them is there?

Sheeple - Wallyus Simplicus

And if you are a very smart and shrewd person, you will learn to be very interested in what the Sheeple as a herd want next. Especially if you own a ton of common stocks. When the herd of Sheeple move as a group, shit, they can really move a stock, even a once sure as hell soon to be dead and gone stock. Just ask anyone that works for Apple! Now the Sheeple don't know why they want certain things, all they know is that they want what the other Sheeple want, and they will darn near do anything to be good Sheeple to have exactly what the other guy Sheeple wants and / or already has.

The thing that the Oracle of Ottawa has learned is that the Sheeple can make you really stinking rich. You just have to be able to guess somewhat closely what you think they might possibly want in the near future. This means that you must always have a nice inventory of common stocks that in any way could be possibly affected by the Sheeples herd mentality. Just remember that once one of those stocks goes off and turns a ten to fifteen bagger, be smart enough to get rid of it right away to some other sucker, preferably one of the Sheeple who thinks that he is smarter then you.  

Now the average Sheeple come in four common varieties. The Preps, The Wally's, The Trots, and the most common and dangerous, the skidmarks. Now the Preps are at the appex, the Wallys just like the Dilbert cartoon character fills up over 85% of all corporate cubicals at the time of this writing. The Trots are like specs in a Brownian motion, they just smile and hope to get along, somehow.  The skidmarks are the largest, most powerful and certainly the most dangerous of all the Sheeple. They seem to come from all levels of society. There is no understanding them on an individual basis, mostly because most of them don't even know they are alive. And if you investigate into the situation, they really couldn't care less. But when they want something, look out, they can move stock markets around the world, and just as quickly forget about it when they stray on to something more desirable that they had no idea that they wanted....    

Rogers Communications - Twilight Of A Titan?

A man of parts would often be at loss without the company of fools.
Francois duc de La Rocheffoucauld, Maxims, No. 140

It is hard to believe that once upon a time in Canada Rogers Communications was one of the most loved companies in Canada. If memory serves, it always made the top 100 Canadian Employers List. If you had a tech or billing problem there was no long aggravating voice mail tree, someone actually answered the damn phone and took care of you right away. And back in the days when Ted Rogers ran it all, you hardly ever had to call.   

Ted Rogers - Spinning in his grave?

Now all telecom companies in Canada are totally despised and dreaded. Rogers doesn't seem to have any real employees any more, but rather an army of minimum wage contractors and temporary foreign workers, that know nothing about your problem and couldn't care less. But you can be sure the marketing never stops. As the price keeps creeping up on your cable package the quality of the content seems to slipping the other way in rather perfect proportion. A thousand channels and nothing on.

It was just before the last Labour Day weekend that the Oracle of Ottawa noticed that his Cisco cable box had been re-programed with what appears to be software for the new Rogers PVR, version 3.0, that can tape 8 shows at once! (Who wants that??) The Oracle of Ottawa was not amused, but there was no way you could do anything about it. There was a two hour wait time to talk to a tech rep that weekend. Which makes perfect sense. Force crap on the customer and then send all the tech reps home for the long weekend so you won't have to pay for overtime. Meanwhile, we are stuck with cable boxes that are as slow as a fat pig in thick shit.   

Meanwhile there is no baseball on due to faggot tennis, again! There is no one to call on this either. The Oracle of Ottawa tried one night recently, and was told by a thick East Indian accent, that; "Sir, you cannot complain"!! You can't make this stuff up. When my cable box was re-programed, the Oracle waited a very long time again to find out that I couldn't complain, but while I was waiting the Oracle heard that stupid PVR pitched endlessly. 

Rogers Communications has a lot of serious problems. The first and largest, is poor management. The second is that they are in too many business's that they don't know anything about, such as production and content creation. This goes equally for all the giant telco's in Canada at the time of this writing. Have you ever tried to watch the Discovery Channel lately? And where did all the baseball games go that the Oracle always used to enjoy? Note to executive suite: Yachting is not a sport!

But the lads at Rogers have a monopoly. Where else are the proles going to go? Well, would you be surprised if the Oracle of Ottawa told you Dear Reader that it is quiet possible that the whole business model of the Rogers monopoly could be shortly just a bad memory? The Oracle of Ottawa has noticed the marketing of the first HD TV wireless TV boxes by Bell at his local mall. Hmmm... a wide area network otherwise known as a WAN. No infrastructure to maintain. No large barriers to entry. How long will it be before someone simply sets up a dish and just re-brodcasts what is in the clear on the aether? The Oracle of Ottawa can see very much inexpensive choice on the very near horizon. Think about it...

The Oracle of Ottawa certainly does not own Rogers stock. And if you happen to be an owner or a manager of a very large holding in a portfolio, the Oracle of Ottawa strongly recommends that you start getting rid of it all in the very near future. With the advent of the wireless HDTV box and very many providers Rogers, Shaw, Telus, and Bell are shortly going to be Titans without a business.... Like video rentals, remember that?

Could it soon all be gone, like it never existed? Good riddance!!!

Evolution, Physics And the Death of Hockey

A man cannot become a child again, or he becomes childish.
Karl Marx, Grundrisse, p. 31
 
It is a truly great day when a big union pension fund puts the nuts to the corporate overlords. And this indeed was the case of the Ontario Teachers Pension Plan selling or rather dumping there interest in Maple Leaf Sports Entertainment. Yes Rogers and Bell got a hell of a deal for a mere 1.32 billion dollars! At first I didn't get it either. But upon some relaxed thinking about it, it all dawned on in a flash.

Hockey-Greece 500 B.C. Not a Canadian game at all!!

You no doubt have heard in the old style vulgar media of all the hazards of playing hockey today. Concussive brain injury, causing fatal life shortening brain degeneration. The guys at OTPP are just brilliant. They quietly realized after some thinking about thinking that the game of hockey is done for. The equipment has advanced incredibly quickly, the conditioning of the players is just insane and the speed of the game and the average size of the players has increased much faster than the ability of the actual human being to catch up! Hockey has reached the end of the road. Or it will shortly. Some very smart people saw the writing on the Zamboni and pushed the sell button. Just brilliant. The same thing goes for the basketball team. The average player height is now approaching seven freaking feet tall. In another few short years the average height of the players will no doubt be hitting eight feet. What will happen to the game of basket ball then? The scores will be like 300 points a side average and the guy could shoot down to score. The slam dunk will be from the midget era! Well maybe Bell and Rogers will get a risk free rate of return from the real estate. It all won't be a total loss.

The OTPP has done a lot of very smart stuff. Why they have more money than the 'Harper Government'! And they have true "market power", that is they have killed deals and made unlikely ones more than possible. Just imagine if they teamed up with CALPERS and OMERS. Why they could do what the 'Harper Government' couldn't even begin to dream to do.... Create a virtual workers state....

That asset value is now  107.5 billion! Someone knows what they are doing.....

Dementia at Desjardins (II)

Value, therefore, does not stalk about with a label describing what it is. 
Karl Marx, Das Kapital, Buch I, Chapter 1, Section 4, p. 85

Well, well. It seems that all the high powered Fart Catchers in the world, or at least on Bay Street in Toronto, can't make every thing happen, like they sell  it to the hapless corporate clients. In the mail this morning was a letter from my stock broker (RBC) extending the hardly generous offer for my Western Financial stock! The extension goes from Feb. 24, 2011, to March 17, 2011!  My, my! Who says small investors don't have power?

Karl Marx says; Just like I told ya!

The reason I wont take the crummy $4.10 a share is that Western Financial owns a Chartered  Bank! Yeah! A Schedule I Canadian domestic bank!  Called Bank West. In Canada you don't open a bank like a 7-11 corner store! They are a gold mine! And a Charter that is required to open a new bank is rare and very hard to get. I wouldn't take a $100.00 a share! And I strongly suggest that you don't either! If they had to extend this deal, it very clearly  appears to be in trouble! What usually happens on a "done" deal is that the first date is met by the majority of the stockholders. And the majority required depending on the domicile province is usually much more than 50% + 1! So this letter received this morning tells me that this dog is titsed! And enough of that...

Karl Marx said a long time ago that the worker would only get justice when he owned the means of production. Back in his time, in Victorian England, the joint stock limited liability company was in its infancy. It was nearly impossible for a normal working person to open an account with a stock broker. Therefore Karl Marx assumed in his writings the violent course of in the street social revolution. Move the clock up to today, 2011, any working person in the Americas, European Union, and most of Asia can own stocks. So how many do you own? There are nearly 7 billion people alive today. About 3 billion could easily become direct shareholders.

Give me 10 shares of BNS, Karl Marx sent me!

If there is one thing that keeps the ruling class up at night is the thought of the lumpen proletariat deciding all at once that they are going to get theirs! Nightmares of masses of activist share owners. Mutual and exchanged traded funds impossible to market and sell. It would spell the end of their world and the beginning of the dictatorship of  the proletariat! Just like Marx said at the end of Das Kapital Buch I in 1867! The times have caught up to the theory! Are you going to step up?

You will soon find out if you have the knack. Read about what the great investors in history have done. And read about what the great investors alive today have done and are doing. I mean only simple Buy and Hold investors such as say Warren Buffet. Let me tell you from my experience; behind many great fortunes and a multitude of small ones, there exists no crime! It is your birth right to be rich! So get the fuck on with it!

That's all Folks!

Paradox of the Rate

It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion. 
Adam Smith, The Wealth of Nations..., Book V, Chapter II, Part II, Article I, p. 911

It is with increasing consternation that I and you, have to deal with the logic of the Conservative Party of Canada Bund in respect to further lowering of corporate tax rates. If you are presently alive and breathing on your own, and have the luxury of an I. Q. greater than a houseplant, you are aware of the presence of corporations in your everyday life. A corporation is essentially a legal person created to pool capital for ventures while protecting the investors with something called; limited liability. Or the great deal of putting up money, and not having to worry about being called on to pay way more in the future, like could possibly happen in the nightmare scenario of a proprietorship. I don't want get too deep into this here and now. But the creation of the modern day corporation as we know it today is a very interesting story. A really great little book that will bring you up to speed real quick is; " The Company" - A Short History of a Revolutionary Idea. By; John Micklethwait and Adrian Wooldridge. 

Congratulations! Your an Owner!!

 Now today there are thousands of listed corporations. You and (for sure) I can buy shares or essentially pieces of ownership in the entity we are interested in. Great idea all around isn't it? There are as a rule of thumb i.e the rule I use to select company shares to buy and hold for eventual profit is that there are essentially three kinds of companies. Growth companies, think RIM and APPLE. Value companies, think Trans Canada Pipe and Russell Metals. Then there are all the rest...or known in the business as commodity plays. For example an airline is a commodity business. You can choose from a score of the damn dogs to take you where you want to go. Essentially a crummy business, throat cutting competition, high constant risks.. nothing but more of the same to look forward to in the future.... (But air freight! Can be a hell of good ride...)

As you are no doubt aware, there are good corporations that you never even hear about and there are,truly are, bad corporations that are in the news darn near all the time. When I was a just a little kid in the 1960's the corporate tax rate in Canada was 40%. There seemed to be corporations all over the place even then! I can't seem to recall any leaving the calm and stability of Canada because the corporate tax rate was to high!

Now part of Sony Corp.

  As the Tory's continue to lower the corporate tax rate ever lower, which companies do you think in the future will find Canada attractive? Oh you in the back! Your sharp! You are going to have a skidmark flood of companies like "Acme Lead and Acid" or "Gimcrack Radioactive Undisposable Waste Inc."  It will be a freaking NIGHTMARE!! That is the paradox of low corporate rates! Meanwhile as this is happening, all the posh outfits, like the drug companies and the cutting edge manufacturers, will be heading to the European Union! To the high tax rates and the golden stability found therein.   

The argument that the Tory's give to you and I is the cover story. The cover story hides the hidden agenda. The hidden agenda is to reduce all the social treasures of Canada to a memory. The ultimate goal is to convert Canada to a social penal colony. (Co-ordination by the Bilderberg Group.)  I am deadly serious folks. If you want the society you dream of with all the best companies beating at the doors to get in, put the corporate tax rate back to 40% ! 

 See! I am not the only one upset with wee Jimmy.....