New At Automatic Finances: The Upside Of Celebrity Financial Advice

Spurred on by Jason Unger's excellent post Please Don't Listen To Celebrities For Financial Advice, I was inspired to come at the topic from another perspective.

Automatic Finances: The Upside Of Celebrity Financial Advice

I'm also thrilled to tears to contribute to Automatic Finances, one of the finest personal finance blogs out there. Now that I've cleared a backlog of other projects, I hope to post there more often.

*pictured: Soon to be destitute Nicolas Cage is a celebrity whose financial decisions you definitely don't want to emulate.

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New At Automatic Finances: Why Reverse Stock Splits Are Bad

Automatic Finances: Why Reverse Stock Splits Hurt Shareholders

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New At Automatic Finances: Diversify. Diversify!

Automatic Finances: Diversify Your Investments. No, Really, We Mean It

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The Epicurean Dealmaker's not happy, either

Since I'm being derivative today, here's a link to the latest screed by the impossible-to-excerpt Epicurean Dealmaker, whose fiscal perspicacity is matched only by his vitriol.

The Epicurean Dealmaker: Live and Let Die

These firms, and the people who run them and work for them, have been living by the sword for a long time. It would be no great American tragedy if some of them died by the sword today.

There's more, of course. A lot more. Don't hold back, TED, tell us how you really feel!

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ClusterStock's Modest Proposal For American Economics

In only his second day on the job, ClusterStock's John Carney is already swinging for the fences, and knocking them out of the park. To wit:

Stuff People Should Stop Doing In A Financial Crisis

Recognizing the financial calamity faced by the United States, John McCain has decided to “suspend” his job as a presidential candidate until a solution can be worked out. He’s called on Barack Obama to do the same, and wants to cancel the presidential candidates debate scheduled for this Friday.
While we’re tempted to breathe a sigh of relief that we’ll no longer have to go through another day of this crisis without the economic leadership of McCain, we realize we should be following his example. There are dozens of things that need to be suspended in light of this calamity. Here’s five.

He then goes on to itemize the activities that should be suspended in light of the gravity of the situation that now imperils the US economy.

Really, none of them are anywhere near as absurd as the idea that McCain, who admits to knowing fuck-all about economics, should be allowed a time-out from his campaign for the Presidency. In fact, some of Mr. Carney's suggestions are downright salubrious, and if adopted swiftly might actually save his country.

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Sony Up On Net Profit, Down On Sales Volume

But overall, not a bad 4Q, really.

Sony posts profit but expects decline this year

For the fiscal fourth quarter, Sony posted a profit of 29 billion yen ($277 million), a reversal from a loss of 67.6 billion yen in the same period last year.
For the financial year through March, Sony earned a better-than-expected profit of 369.4 billion yen ($3.5 billion), a record for the company known for its Walkman portable players and "Spider-Man" movies.
That's nearly triple the 126 billion yen earned in the previous fiscal year. Quarterly sales dropped 6.5 percent to 1.95 trillion yen ($18.6 billion).
...
The biggest obstacle is the unfavorable currency swings that are expected in months ahead, the company said.
Sony is expecting the dollar to trade at about 100 yen for the current fiscal year. The dollar, which traded at an average of about 114 yen last year, fell below 100 yen earlier this year and is now trading around 105 yen.

To use a barely appropriate analogy, their gain in net profit owes more to having coughed up the last dregs of the financial hairball that the Playstation 3 launch had clogged their bowels with, and now their operating cash flow isn't stoppered up any more.

On the bright side, since analysts are tired of hearing Sony alternate between blaming everything on PS3 or Nintendo, they're going to point fingers at the yen for the next few earnings calls.

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Fantastic New(ish) Finance Blog

Television isn't the only place where supporting characters can benefit from a spinoff.

Longtime anonymous Dealbreaker.com commenter "1-2" has parleyed their success in the commentariat into a finance blog of their own.

1-2 Knockout

Not to sound too much like a fanboy, but 1-2 and the associated posters at 1-2 Knockout are brilliant, and you should read them.

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This Week In CE Pro: Best Buy Opens Their Own Venture Fund

CE Pro: Best Buy Capital to Invest in Tech Innovations

This is a pretty important piece of financial news, at least to people involved in the CE industry.

Me, I just enjoyed employing this snarky expression:

"As you can imagine, Best Buy’s plan to build not one but two capital funds requires recruitment beyond an ad on Monster.com and is not suited for the kind of in-house personnel development you’d use to produce General Managers or Category Buyers out of the rank-and-file staff."

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Auto Credit is a Gong Show, Media Just Now Catching On

Fantastic post from WC Varones the other day, highlighting just how ridiculous automobile financing has become.

W.C. Varones Blog: W.C. Varones Blog's 2007 Man of the Year: the American Consumer

He's stubborn, stupid, and suicidal as a lemming.It's not just houses. Joe Six-pack has found a way to get into house-sized debt on a car:
When Jennifer and Bobby Post traded in their 2001 Chevy Suburban last year for a shiny new Ford F-350 turbo diesel with an extended cab, it seemed like a great deal. Even though they still owed $9,500 on their SUV after the trade-in value, they didn't have to put a penny down.
The dealership, near the Posts' home in Victorville, made it easy; it just added the old debt to the price of the new truck and gave the couple a seven-year, $44,276 loan.

I live in the middle of Oil Country. We're like the Texas of the Arctic Circle, and that means that this town is full of pickup trucks. Big, gas guzzling, chromed out pickup trucks with HEMIs and other redonkulasly large power plants, and all the aftermarket accessories.

It also means this town is full of dudes earning six figures who even so, are living paycheck to paycheck.

I'm not normally one for negativity, but when I see a $70K truck with two $3K quad ATV's strapped down in the back, my first thought isn't "Wow, he must be really doing well" it's "How much of that is financed?"

As I said on WC Varones' blog, a guy I know got into selling motor homes and RV's a few years ago. His best customers are oilfield workers from Newfoundland. They trade up every year or two to a bigger/better RV. I am not making this up. They're never concerned about the 30-40% thwack of depreciation they take when they trade in a barely used model, all they ever ask is "What will my payments be then, eh?"

You want to talk about "house-sized debt?" How about being upside down $50K on a motor home?

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Quote of the Day

Owning one home is being a homeowner. Owning 2 homes is
being an investor. Owning $1 billion of CDOs is being a doofus.

Posted by: Fake Don Lapre* August 21, 2007 12:48 PM

*one of Dealbreaker.com's coterie of anonymous internet troublemakers comments section trolls. Call them the Trollocracy.

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Bank of Canada says Loonie has ideas above its station

It's great to hear that the B of C's pet economists are in line with what every exporter, small business owner, and blogger with a liberal arts degree have been saying for months. Of course, the central bank's people use more charts and formulae to say it.

Yahoo!: Bank of Canada model points to overvalued C$

TORONTO (Reuters) - The Canadian dollar is overvalued given current commodity prices and interest rate levels, according to calculations based on a March 2006 Bank of Canada model for currency forecasting.

...

IDEAglobal said the model suggests the Canadian dollar's appropriate short-term value should be around C$1.09 to the U.S. dollar, or 91.74 U.S. cents, given oil prices of about $75 a barrel and a Canadian overnight interest rate of 4.50 percent.
The currency finished at C$1.0534 to the U.S. dollar, or 94.93 U.S. cents on Thursday, down from last week's 30-year high of C$1.0340 to the U.S. dollar, or 96.71 U.S. cents. U.S. crude futures were around $77 a barrel.
The push above 95 U.S. cents has brought a flurry of predictions that the currency could soon hit parity with the greenback.

The Bank of Canada doesn't think it's justified. The U.S. Federal Reserve doesn't think it's justified. Observers and those affected most by the exchange rate don't think it's justified.

And yet, here we are.

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Newsflash: People who badger you with statistics are usually trying to sell you something

Lovely little spot of rudeness on Dealbreaker yesterday in response to a dire pronouncement.

Dealbreaker: Jeremy Grantham: RUN FOR YOUR LIVES

Are you presently working for a hedge fund or major bank? May Jeremey Grantham, chairman of Grantham, Mayo, Van Otterloo & Co. (via us) suggest that you get the hell out of there, because most of you are going to die anyway? That’s right, Dealbreakettes, according to Grantham, credit-market declines are going to force “as many as half”-- half, 50%, 1 of every 2-- of all hedge funds to close in the next five years. Last year 717 hedge funds closed, leaving 9,800 in business. Ergo, FOUR THOUSAND NINE HUNDRED of you are soon to be history (we did the math). Oh, and at least one global bank (gut instinct: Goldman Sachs) and “one or two” of the largest private equity firms, because those assholes have it coming. Grantham can make such apocalyptic forecasts for 2012 because he is 68, and may very well be dead by then. Grantham, Mayo, Van Otterloo & Co will survive, presumably.

Not to swing too hard from Nassim Taleb's nuts or anything, but I get a kick out of these wildly doom n gloom pronouncements from pundits who are, in fact, totally full of crap.

As it happens, I've conducted extensive research, analysis and modelling that indicates that 88% of pundits, 94% of tv talking heads, and 173% of bloggers pretty much just make up wild-ass statistics to get attention for themselves.

My favorite dumbass stat was from the researchers who (just in time for the 2004 Olympics) plotted the improvements in the 100M sprint among male and female sprinters and deduced that at the current rate, women would be running the 100M faster than men by 2036, or some such. Oddly enough, they didn't trumpet how if you followed their models all the way down the line, both men and women would be running a 100M sprint in 0.0000 seconds by 2287 AD, at the latest.

Idiots.

On the bright side, there's a lot of sensible talk in the comments section.

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Criminalizing failure

The brilliant and pseudonymous Equity Private has a short, crystal clear piece up on her blog commenting on the urge government has to enact heavy-handed legislation in the wake of financial failures.

Equity Private: The Crime of Losses
The bemused surprise that would formerly accompany a free lunch has turned into something like annoyed restlessness. Today, a free lunch is received with a look that says "what took you so long and where is desert?" Return is expected without the attendant risks.

I fail to understand why so many otherwise clever people put their head in the sand about risk and only ever look at potential return. It's not just investors and lawmakers, it's finance professionals too: people who should know better.

Risk is not some vague abstract notion, it's right there, breathing down your neck. If there was no risk, the payoff would be minimal. Of course, in return for the prospect of a high payoff, the chance you take is that there will be no payoff at all. "00" on the roulette wheel doesn't happen every time the croupier spins the wheel, that's why the payout is 35-1. Even with a Red or Black bet and a 2-1 payout, there's a 50% chance that you will lose.

Regarding the moves afoot to criminalize financial failures in the wake of investor losses at Bear Stearns, Amaranth, and others, if government was really able to criminalize arrogance and poor decision making, I would be in real trouble!

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Sirius gets fed from the table by Morgan Stanley

TWICE: Sirius Gets $250M Morgan Stanley Loan

New York — Sirius Satellite Radio reports it has obtained a $250 million senior secured term loan commitment from Morgan Stanley Senior Funding.
The facility will mature in 5.5 years and have covenants substantially similar to those under the company's existing 9 5/8 percent Senior Notes. The proceeds will be used for general corporate purposes, Sirius said.
Morgan Stanley is acting as the sole lead arranger and has committed to provide the entire principal amount of the facility, subject to customary closing conditions. “This transaction takes advantage of favorable market conditions and significantly strengthens our balance sheet,” said David Frear, executive VP/chief financial officer of Sirius.
Sirius said in a statement that it believes that its merger with XM Satellite Radio will close by the end of 2007.

Translation: "general corporate purposes" = "pay the bills, since our subscription revenue isn't quite enough."

Remember, for regular people, getting another credit card when you're a little short is bad, but a company securing additional financing when they're a little short is good.*

I'm still skeptical about the XM/Sirius merger actually coming together, by the way.

*Until the party comes to a stop, that is.

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Telus offers bond issue to pay off other bond issue

Canadian Business: Telus announces offering of up to $1 billion in unsecured notes
VANCOUVER (CP) - Telus Corp. (TSX:T) said it plans to raise up to $1 billion in unsecured notes to be used for general corporate purposes and the redemption of higher interest U.S.-dollar denominated debt.
The telephone company had initially announced plans to raise $800 million on Thursday morning, but increased the size of the offering to $1billion after strong demand from the market.
Telus said it will issue $300 million in five-year notes and another $700 million in 10-year notes.
The 4.5 per cent five-year notes were priced at $99.991 for an effective yield of 4.502 per cent, while the 4.95 per cent 10-year notes were priced at $99.953 for an effective yield of 4.956 per cent.
The notes will be offered through a syndicate of agents led by TD Securities Inc.
Closing of the offerings is expected by March 13.

Point of interest for casual observers: when individuals take out a new credit card to pay the balance owning on an existing credit card, that's not okay. When institutions offer a fixed-income debt instrument to pay off their obligations on a prior fixed-income debt instrument, that's okay.

"Strong demand from the market" = "Shit, we need more liquidity!" This is the corporate equivalent of sitting down in the nice office of the neighborhood CitiFinancial branch and being told by the nice girl there "You asked for a $15,000 debt consolidation loan. But you've been pre-approved for $20,000. Wouldn't you like some extra money to fix things up around the house?" and going along with it.

What am I implying? I don't know...

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