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Articles to start off the month of July in 2011

Happy Canada Day to fellow Canadians... and Happy Fourth of July to my neighbours down south.

Here are some articles that have been on my list that I have read or plan to read. As usual, unlike other blogs, I don't necessarily link to recent articles so do keep the timeline in mind when reading my posts.

  • (Recommended) Bitcoins - a novel, virtual, currency (Bloomberg Businessweek): Interesting story of a virtual online currency. I don't know if the US government, and others, will start cracking down on this—it's a threat to the existing currency scheme—but it remains to be seen. It's also interesting to see how the value of fiat currencies—bitcoin is purely virtual but limited by an algorithm—is set. Bitcoin's value appears to fluctuate wildly but that is likely due to the small number of users.
  • "Reinsurance explained" (Liarspoker for Gurufocus): A basic introduction to reinsurance companies.
  • (Recommended) Retained earnings for net-net stocks (Geoff Gannon for Gurufocus): Another great write-up from Geoff on retained earnings.
  • "Understanding Free Cash Flow Series: Depreciation and Accounts Receivable" (Jake Emerson for GuruFocus): Primer on FCF for those new to accounting.
  • Synthetic drugs, a new way to get high (Bloomberg Businessweek): Lengthy profile of a new trend profilerating throughout America. Synthetic drugs that replicate the effects of marijuana, as well as cause new lethal side-effects, are becoming popular. As if the out-of-control 'war on drugs' isn't enough of a problem, this new problem may be even harder to battle.
  • "Chinese Go on Global Homebuying Spree as Local Markets Tighten" (Bloomberg): Many have been saying that the booming real estate market in Vancouver, Canada, has been propped up by foreign Chinese buyers, so this story isn't too surprising.
  • (Recommended) Is shale gas a "near-fraud"? Is there too much hype? (New York Times; h/t CanadianValue): Some people are starting to suggest that some of the shale gas plays are almost fraudulent with economics being overstated. This article by the New York Times questions the economics of shale gas. You may also want to check out this bearish presentation, "Shale Gas - A view from the bottom of the resource pyramid" by Labyrinth Consulting Services (h/t LwC). I usually have an opinion on everything but not sure about this. Given the involvement of supermajors, who aren't forced to be involved in shale gas, I am doubtful about the bearish claims. I would find it hard to believe that supermajors would invest billions into shale gas without doing thorough analysis.
  • "Media, entertainment industries take note: The game industry has figured it out" (The Globe & Mail): Very few would have imagined that the electronic game industry would be larger than Hollywood. One of the unique things about the industry is that it keeps experimenting and re-investing its business models.
  • The video game industry's first "agent" (Bloomberg Businessweek): Interesting how this industry, which brings in more revenue than movie theatres, has evolved in the last decade.
  • (Highly Recommended) China's hard-landing scenario - Part 1 - Part 2 - Part3 - Part 4 - Part 5 (Gary Shilling for Bloomberg): Gary Shilling has been saying it for a while and he maintains his view that China is headed for a hard landing. Even if you aren't bearish on China—this means all you commodity bulls ;)—you should check out this opinion piece...just in case.
  • "The Risk Down Under" (Grant's Interest Rate Observer, vol 29, no 11): If bearish on China, it's probably a logical move to be bearish on Australia too. At least that's what Gary Shilling says in the articles linked above. Grant's Interest Rate Observer makes two older articles freely available and I ran across this one discussing the bearish case for Australia, partly due to the risk from China. I think it ties into Shilling's conclusions so anyone interested in China may want to check this out. (Refer to the first article in the document.)
  • (Highly Recommended) "A Walk on the (Asian) Wild Side" (Jim Chanos, Kynikos Associates): Chanos' China bear thesis outlined in detail, from the Fall 2010 Grant's Conference. Apart from the Fortune article I linked last year(?), this is the only material where I have seen Chanos disclose actual short opportunities. The interesting one to me is Vale (NYSE: VALE). Although speculative in nature and not exactly a prudent move, I wonder if buying put options on something like Vale is an attractive opportunity. Any thoughts?
  • Morgan Stanley goes against some China shorts (Bloomberg Businessweek): According to this article, Morgan Stanley is taking a long postion in Yongye International, which has been under attack by short-sellers. It remains to be seen how this plays out.
  • (interesting) "Reflections of a value investor in Africa" (Francis Daniels, Anibok Investment Research): I have been going through some freely-available presentations from past Grant's Conferences. Here is a story by one value investor—I don't know anything about his track record—from Africa. Here is the related presentation that was given back in fall of 2010. I don't know if any readers from here are from Africa but if you are, you may find it interesting (also leave a comment because I'm curious if anyone reads me from that part of the world). I took a quick look at the presentation (haven't read the story yet, although it looks like a fun read) and I just don't know how an investor factors risk into his decisions. For instance, the author is bullish on Zimbabwean equities that are less exposed to currency depreciations—by owning tangible assets and investing in non-Zim dollars—but I just don't know how you factor in the possibility of government seizure of private assets.
  • Book review - Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present by Jeff Madrick (New York Review of Books): In this review of Jeff Madrick's book, Paul Krugman and Robin Wells contemplate why financial busts have gotten bigger over the last 30 years.
  • RBC throws in the towel on US expansion (Report on Business magazine): Canadian banks have been trying to expand into the US market for years, with disastrous results... so far.
  • The fall of MySpace (Bloomberg Businessweek): One of the most important Internet service companies of the Internet era has fallen, and it may have a hard time getting up.
  • "North Miami's Condo Catastrophe" (Bloomberg Businessweek): No other way to describe this disaster other than as a catastrophe. I'm curious to see what comes of all these buildings.
  • (Recommended) Details of the Deepwater Horizon oil disaster (Bloomberg Businessweek): Very good article on what happened. Good job by the authors Peter Coy and Stanley Reed (with contributions from a few others).
  • (non-investing) "Looking for Someone - Sex, love, and loneliness on the Internet." (The New Yorker): Online dating... the evolution of dating and relationships.
  • (non-investing; not safe for work) Book reviews of  The Girl with the Dragon Tattoo by Stieg Larsson; The Girl Who Played with Fire by Stieg Larsson; The Girl Who Kicked the Hornet’s Nest by Stieg Larsson (New York Review of Books): I don't read books, at least not fiction—haven't read one since High School—but I do read book reviews. Yes, I realize that's kind of weird but that's just me ;). Even without reading it, Stieg Larsson's controversial, highly graphic, book trilogy is quite fascinating to me. If interested, you may also want to check out this book review in The New Yorker by Joan Acocella a few months back (a side thing I found remarkable was how Joan criticizes one of the male leads in the story for being too passive (when it comes to love) and not pursuing the lead protagonist).
  • (non-investing) (Recommended) "The Variety of Movie Experience" - a review of the film, Tree of Life (New York Review of Books): Haven't seen the film yet but it looks like Terrence Malick finally releases a film that satisfies most critics, at least when it comes to art films.

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