Tuesday, December 28, 2010 3 comments ++[ CLICK TO COMMENT ]++

If you are bored during the holidays, here are some articles to kill time

Some people are on holidays; others have light loads—assuming you aren't one of those airport workers stuck trying to clean up from the snowstorms ;) Here is some reading material to keep you busy...

  • (Recommended) Potential actions by regulators to control the too-big-to-fail banks (Reuters Breakingviews via Financial Post): Regulators and government officials created huge moral hazard by creating the oxymoronically-named too-big-to-fail banks. Now they are trying to figure out how to regulate them and, ultimately, prevent the banks from turning into too-big-to-save (i.e. banks that will threaten sovereign solvency). This is a good article that presents several solutions and the ones likely to be followed by the government officials and regulators in the near to medium term... As I have mentioned in the past, the "proper" solution in a capitalist society is to punish the financiers who enable all the risk-taking. In this case, the bondholders have been spared (except for Lehman Brothers creditors) and they should be forced to take haircuts. There is no other free-market solution! Everthing else just creates bigger moral hazards in the future and, to use the beaten-to-death cliche, just re-arranges the chairs on the deck of the Titanic.
  • The ascent of gold (Bloomberg Businessweek): A lengthy article chronicling the rise of gold over the last decade. Part of a feature report that covers the dark side of the gold mining business.
  • Ten American brands that have dimmed (24/7 Wall St): Used to be leading brands but not anymore.
  • (Highly Recommended) Calculating free cash flow (GannonOnInvesting): Perhaps the most important metric for modern fundamental investors, free cash flow is not always easy to determine. Many data aggregators and automatic computations lead to big mistakes with the FCF calculation.
  • Useful article for Canadians thinking of buying residential real estate in the US (Financial Post): Good article providing an overview for any Canadian thinking of buying property down South, along with pitfalls that one may face.
  • Any Canadian thinking of retiring in the US? (Financial Post): Some Canadians may be thinking of retiring permanently in the US; or some Americans may want to move to Canada. This insightful article details the differences between the countries.
  • (Highly Recommended) Can KKR turn itself into a Berkshire Hathaway? (Bloomberg Businessweek): This is an old article from December of 2009. Although Kravis is a fan of Warren Buffett, comparing KKR to Berkshire Hathaway is one of the dumbest comparisons I have ever seen. Apart from the holding structure and the continuous purchase of assets (taking public companies private), I don't think there is much of a similarity. Having said all that, this is a good article (even if you are not interested in private equity, check it out; the accompanying video, which annoyingly starts playing by default, is also worth listening to).
  • Companies buying back stocks at the wrong time? (Saj Karsan for GuruFocus): Saj Karsan does a good job demonstrating how companies are buying back stock when prices are high and didn't buy back as much when prices were low an year-and-a-half ago... I wonder about these situations. Is it really the company making a dumb move? Or can it be that the effect is actually the cause? That is, what if prices move higher because of buybacks and not the other way around? I also wonder about capital flows, particularly from retail investors, which generally shows negative flows at low prices (near market bottoms) and strong positive flows when prices are high (and near market tops). What if we are observing the result of capital flows? I'm not too familiar with it but do recall how George Soros' Reflexivity theory suggests that market participants react to prices, but prices also react to market participants (i.e. unlike conventional thinking, markets are actually a two-way relationship). I wonder. The "dumb money" is almost always caught off-guard but can it really be so consistent? Always selling near a bottom and always buying near a top?
  • Apple vs Nokia patent dispute visualized (Fortune): If you have an interest in intellectual property disputes, do check out the FOSS Patents website run by Florian Mueller from where the source diagram comes from.
  • (entrepreneurship) Useful resources for entrepreneurs (The Globe & Mail): Useful websites, tools, and references for those into entrepreneurship. One useful site mentioned is the Canadian Intellectual Property Office, the government website where you can search patents, trademarks, and copyrights.
  • (entrepreneurship) Turnaround success in the kids games arena (Financial Post): A successful turnaround of a bankrupt games company.
  • (career) Four personality/trait/skill evaluation systems (The Wall Street Journal): An article from earlier this year, discussing four personality/career/trait/etc tests that are available. None of them are free, although you can find some some non-professional Myers-Briggs online tests, and some people find these tests useless. I personally think it can help one figure out details about themselves. It may not be perfect but at least it gives some ideas on what you should do with your life.
  • (non-investing) 100 science lectures from leading practitioners (BestCollegesOnline.com): If you are into science and want to kill time, check it out.

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3 Response to If you are bored during the holidays, here are some articles to kill time

Parker Bohn
December 31, 2010 at 8:26 PM

Small investment idea I thought your readers might find interesting:

I've just taken a position in COSN as an arbitrage play.

This is a reverse split arbitrage, where COSN is trying to reduce their # of shareholders so they can deregister with the SEC.

Shares last traded at $1.90, and there is a vote on Jan 10 on whether to cash out all shareholders with less than 500 shares at $2.24 per share.  Steel Partners Holdings (whoever they are) owns 47% of COSN, so I assume the vote will be an easy yes.

If something goes wrong, then the downside should be limited.  COSN is a non-operational acquisition hunting company which basically is just a pile of cash.  Since COSN is selling slightly below its current cash value, there should be a definite floor under the stock price.

One caveat is to make sure your 499 shares are not held in 'street name', or the arb may fail.

:) Enjoy, and here's to a new year! :)



Sivaram Velauthapillai
January 1, 2011 at 9:24 PM

Thanks for the idea ParkerBohn. I'll take a look.

Happy New Year and all the best to you in 2011...

Parker Bohn
January 21, 2011 at 10:57 AM

Well, that happened faster than I expected!
An easy $169.  Time to plan my early retirement :)

Seriously, though, not bad for about 2 hours of research.

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