Investorial

After my previous blog on Jim Cramer, you may feel that I have a strong opinion of the person and the show. I thought I should perhaps sit through an entire show of Mad Money to justify my decision, and guess which show I saw? It was funny watching the students at the University of Michigan egg on Jim; turning the show into a financial version of Jerry Springer with all the hooting, hollering and let’s not forget the booyahs.

Obviously my opinion has not changed regarding Cramer. But I realized that Cramer is like a durian. For those who don’t know, the durian is a tropical fruit I loved eating as a child. You won’t find anybody without a strong opinion of it. Fans will call it the king of fruits, while others will call it the stinkiest thing they’ve ever smelled. There are simply no middle-ground opinions.

If I’m blogging negatively about Cramer, some people must be liking him right? I searched and found Frank Barnako’s blog about 3 Cramer fan sites. For those who don’t know Frank, he is a CBS MarketWatch editor/exec. I am a long-time reader of Frank’s MarketWatch columns and was one of the first bloggers to (more…)

Investorial should have been on top of this story, but Investing Intelligenty picked it up and ran beautifully with his take on CNBC’s Mad Money. The show’s ringmaster is former hedge fund manager, the boisterous Jim Cramer. Jim was also the co-host on a previous CNBC program, Kudlow & Cramer.

I always thought the show to bring little value to the “common investor”; the ones Jim wished to help. I never did think enough of the show to do research and post on it. Like Investing Intelligently, I could barely stand watching the show for more than a few minutes while I flipped through the channels. It’s all about showmanship for Jim. While he’s busy pressing buttons (more…)

I’ve been participating in a comment thread with Canadian Capitalist about alternative investments. I mentioned an aversion towards ETFs because to what I understand, ETF’s are sort of like derivatives? Though I was hard pressed to find such a definition online.

Investopedia defines Exchange Traded Funds (ETFs) as:

A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange, thus experiencing price changes throughout the day as it is bought and sold.

Because it trades like a stock whose price fluctuates daily, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does.

Great, now we know what the public knows. Here’s what I don’t know. My question is “What’s the asset backing the ETF’s?” Are there underlying stock? And how can there be such frequent trading and movement of money in and out without triggering (more…)

This truly sucks for Canadian traders! I’ve been lamenting the fall of Ameritrade Canada as the nation’s lowest cost discount brokerage (without using a tiered/incentive system). Ameritrade Canada offered US equity trades at US$10.99 per trade. There simply aren’t any discount brokerage that can come close this offer without being a high mileage frequent trader.

TD Waterhouse Canada bought out Ameritrade Canada on January 24, 2006 to strengthen their brokerage business. They are currently in the final stages of preparing to convert Ameritrade Canada accounts to TD Waterhouse accounts. The transition is expected to be complete on June 3, 2006.

That’s right! If you’re wondering whether TD will keep the same fee schedule, not a chance! The new fees will apply to new accounts effective June 3, 2006. The current Ameritrade Canada fees will remain in effect until close of business on June 2, 2006. If you are currently an Ameritrade Canada account holder, do remember that (more…)

One of the topics I’m constantly asked to explain is the concept of dividends, ex-dividends and other similar questions; often by people who think getting into a stock simply for the special dividends and getting out right away is a good idea. You’re only doing yourself the favour of turning your principle into a taxable liability.

I thought about doing more to debunk dividend myths, but why lift a finger when The Motley Fool has already done a 2 part story to debunk 7 common dividend myths. I’ll summarize them here.

1. Stock prices do not adjust downward when dividends are paid.
2. Only the stock price is adjusted.
3. All dividends are taxed at the special lower rate.
4. Everything is reported to you correctly on the 1099-DIV form.
5. Everything called a dividend is really a dividend.
6. Stock splits are not dividends.
7. I can buy just before the ex-dividend date, catch the drop in price, and record a capital loss.

Be sure to read part 1 and part 2 for the full details and explanations! A note to Canadian readers that some of these facts are geared towards American investors. But there are still tidbits well worth your time, especially if a large portion of your dividend companies are American!

If you’re wondering, the above title is a lame pun on the famous phrase “Who Watches The Watchmen?“. If you’re a regular reader of personal finance blogs, you should be familiar with the term “passive investing“. For the uninitiated, it means that you are investing in an index fund - a mutual fund that follows a well-known index such as the Russell 2000, or the most famous index of all, the S&P 500. The S&P 500 is the top 500 companies as determined by Standard & Poors to represent the stock market at large.

So What’s My Beef?
I have long contended that there is nothing passive about investing in index funds. Simply put, you’re paying a fund manager a little less than 1% management fee to enjoy having your portfolio actively managed by somebody else! Who’s that somebody else? The index of course! It’s no secret that indexes frequently add or drop companies from their list. How is this different from regular mutual fund turnovers? In the example of S&P 500 index funds, the only advantage achieved are (more…)

“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”

We’re starting off with this quote to remind us that we should not follow opinions, but rely on our ability to reason and gather facts. Easier said than done, what are facts? Everybody has a way to interpret numbers, figures. One analyst can recommend a stock while another is downgrading it. There can be no consensus in the market for the buyer / seller principle to work - one’s man junk is another man’s treasure.

I am going to look at this post using some numbers; some publicly disclosed, some calculated. But rest assured only to the level that I can understand. Being a Bachelor of Mathematics doesn’t mean anything when it comes to analyzing financial numbers. I’ll only refer to common sense numbers, hopefully nothing beyond comprehension! I’ll also use Canadian dollars for convenience!

The IPO Story
To recap, Wendy’s decided to spin off 15% of its ownership of Tim Hortons in a public IPO. In total, 29 million shares will be made available at C$25 to C$27 per share. Here’s the press release that explains that the preliminary filing prospectus showed an initial target range of C$21 to C$23 per share. The stock IPO has garnered national attention, appearing in newspapers, television, radio, blogs and virtually any media out there! There is a mania going on and that’s why this is a story for Investorial!

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Now that I’ve let slip about why my next blog post will be, you can tell I’m deciding to have a little fun with this! Behold, my preview interview with myself!

Okay, self. Why are you doing this preview? Why not come straight out with your reasons and write the article already?
It’s very simple, Investorial is not a site that recommends or dis-recommends stocks. There are many blogs out there that do a great job. I don’t know of any of the top my head but if you know some, please let me know. I’ll publicize them here!

Wait a minute, you’re not answering the question! Why beat around the bush?
I was just saying that I’m doing this preview to clear up some of the mis-understandings that might occur if I posted the article right away. I don’t want there to be a conflict of interest with Investorial’s mission. I’m going to be coming at this story with a different angle. A perspective that is relevant to discussing about investment/financial media and the information these media gives us. When I write the post, I want to really concentrate on the piece and not have to explain myself.

Why choose Tim Hortons and not any other stock?
I’m Canadian, eh? And Tim Hortons is as Canadian as it gets. When you think about it, Tim’s IPO is a funny situation; with it being a really boring business but yet garnering all the buzz and hype of the next big tech company IPO. It’s also set to (more…)