Friday, March 30, 2012

BlackBerry Maker RIM Rises About 7% in Trading as Bears Starting to Run for Cover.

News of the departure of CEO founder Mr. Jim Balsillie, and news that Research in Motion is seeking strategic alternatives sent shares in the BlackBerry maker sharply higher during Friday's trading session. Still over 70% down from its year ago price, the Canadian technology titan is giving shareholders a brief sigh of relief.

500,000 PlayBook tablets were shipped last quarter, well above the 150,000 shipped during the previous quarter. With the release of the 2.0 software upgrade, along with price reductions, demand is starting to pick-up.

Research in Motion ended the quarter with 77 million subscribers, which is an increase from the 75 million it had at the end of last quarter.

RIM's revenue for the quarter was $4.2 billion, which is at the higher end of analyst expectations.

BlackBerry 10 is still on track for release later this year, which will give a much needed boost to its revenues and subscriber base.

Lower-end BlackBerry 7 models are being developed for the many foreign markets to help stem erosion from new competition, such as many low-end Android models.

Desperately, however, the company still needs a more targeted and forceful marketing initiative. So many consumers are swayed by games and gimmicks on their devices, which has not been BlackBerry's hallmark. Going forward, the company needs to find a way to attract a more fickle audience... less concerned with quality and more concerned with fashion and fun.

Happy Investing and Happy Friday : )

Tuesday, March 27, 2012

Median Weekly Earnings of Graduates Versus Non-Graduates and their Associated Unemployment Rates.

The above illustration from the Bureau of Labor Statistics in the United States highlights the advantage that graduates of various levels experience in terms of both pay rates, and employment prospects. Taken from 2009, one would only assume the discrepency is even worse during today's poor economic climate. Without a post-secondary education, many individuals are now finding themselves underemployed and underpaid relative to many of their contemporaries.

Monday, March 26, 2012

The Millennial Generation of Lost Car Buyers. Those in their 20s are Bewildering Car Makers as they Show Little Desire to Own a Car.

The Millennial generation, those born in the 1980s and 1990s, are bewildering car manufacturers as, in contrast to previous generations, they do not seem nearly as interested in buying or owning a car.

At a conference last year, Toyota USA President Jim Lentz said the following:

"We have to face the growing reality that today young people don't seem to be as interested in cars as previous generations. Many young people care more about buying the latest smart phone or gaming console than getting their driver's license."

Indeed, less than half of potential American drivers under the age of 19 had a license in 2008. This is down from a rate of 66% only a decade before. But the important questions for auto-makers is whether they are buying less cars and not obtaining their licenses because of money and the economy, or because of a genuine shift in their tastes, preferences, and priorities.

In particular, the Millennial generation is known for delaying adulthood and its hallmarks. They are delaying marriage, delaying moving out, delaying getting full-time jobs, and now delaying purchasing auto-mobiles and houses.

Interestingly, in The Atlantic, it is noted that the Millennial generation has a rising preference for urban living, in contrast to their parents' desire to live in sprawling suburbs. If this is true, there will be a large dent in auto-mobile sales as this generation and their children grow older. Expanding suburbia after the end of World War II was a key contributor to the growth of auto-mobile culture in North America, and if the suburb begins to wane, so too will car sales.

So how to increase car sales? The Millennial generation often loves fun toys that look cool, more than they appreciate a product's practicality. Engineer cars that make them feel like they are somehow rejecting the idea that they have to be responsible or grow older. Make a fun car with lots of gadgets, and one that helps them to identify more with a culture that rejects the conformity of previous generations for a new... while, conformity. But one that this time is so self-concious and worried about conforming that it desperately tries to be different and unorthodox for the sake of it.

Will this work? Perhaps not, but watch closely and you will see Ford, GM, Toyota, Chrysler, Honda, BMW, Volkswagen, Mercedes, and others beginning to fall all over themselves trying to preach unconformity and difference to the lost generation of car buyers.

Ally Financial Still Owes A Huge Sum to the Government. The Financial Crisis is not Over, and Canadian Banks Might Still be Left Holding the Bag.

Ally Financial, the Detroit based former finance unit of General Motors, is still owned 74 percent by the United States Treasury. This stake was received in return for over $17 billion in government investment during the height of the U.S. financial crisis. Though it intends on fully paying back the taxpayer's investment, recent news from Bloomberg indicates that the the company will be unable to fetch a large enough sum if it engaged in an initial public offering, or IPO.

It is now being suggested that Ally Financial split into an automotive finance unit, and a retail bank. The retail banking unit, which is what most of us are familiar with from their advertisements, already has $28 billion in deposits. The albatross around the company's neck is Ally's residential mortgage unit, which issued a flurry of bad loans prior to the housing and associated mortgage meltdown in the United States.

Thus far, Ally has paid back $5.4 billion to the United States Treasury. It also almost reached a deal to sell itself to TD Bank and General Motors last year, but those talks fizzled. Buying the beleaguered lender, however, might leave a Canadian bank with significantly more exposure to bad debts than it can handle, which might reverberate back to the Canadian marketplace and its shareholders. TD Bank already paid $6.3 billion for Chrysler Financial, which is not exactly always a prime lender.

Ally's current situation is an indication that though the financial crisis might be in our rear view mirror, it might still be closer to us than it seems. Shareholders of Canadian banks have to be careful that they know what they really own and watch out for their own bankers left holding a big bag of defaulting U.S. debt. The American government would be more than happy to let us share some of the risk.

Monday, March 12, 2012

China Experiences Worst Trade Deficit in a Decade. Demand for Resources Reaches Record Levels. Will the Chinese Consumer Force the Government to Spend its Currency Reserves?

Primary resource industries are poised to continue reaping record profits as China's demand surges and the country experiences its largest trade deficit in over a decade!

Chinese imports in February rose almost 40%, leaving the country with a trade deficit of $31.5 Billion. Exports rose at a slower pace of 18.4%. The primary contributor to the deficit was imports of fossil fuels, which Chinese consumers are demanding in ever increasing numbers as their preferences for American and European styled vehicles reaches record levels.

Inflation in China is heating up, but the administration is still apt to try and keep domestic demand growing in fear of growth collapsing amidst a European recession. Inflation, however, is trying to be reigned in at 4% per annum, a difficult prospect with oil reaching $125 per barrel recently on the international markets. Chinese demand for copper, iron, and oil all rose during February.

It was only a matter of time, but the Chinese consumer is now forcing the state to funnel some of its cash reserves back to the world market, and thankfully for Canada, we are selling the goods that they are buying.