mockba80's Journal

9:51PM - "Canada is open for business but is not for sale"

HTE was my favorite CANROY. Not only did they seat on a great piece of Canadian oil patch (lighter oil then most), unlike everybody else they were vertically integrated, thus when crude was cheap, the refinery did smooth the blow, unlike the rest. From all CANROYs I liked HTE the most.

Now when Koreans bought it 50 cents on a dollar, it is time to count losses and learn lessons.

When Harper's Finance minister went nuclear on valuations of Canadian trusts back on Nov. 1st, 2008, I was too early to enter the very next day - should have waited for the year end and picked it up not at $25, but in low twenties, or discounted extra 10% from already 10-15% discounted price. It was "30% off" sale, not just 10%.

2007 was a good year for the oil patch. HTE January low to July high was 50% up from low $20ies to $33. Looking back I should have closed and reopened later, but back in 2007 it was not that straightforward, plus CANROY by definition is a long play and 50% is not the ultimate take. 2007 was a good year raking 15% in dividends which even with 15% Canadian taxes were healthy 13% return.

2008 should have been even better for Canadian oil considering that crude spiked to around $150 a barrel in summer, but for every action there is a reaction - looney become way too expensive making production costs high and at the end of the day negatively impacting margins. Bubble blowing up and economy collapsing in the second half of 2008 didn't help already plagued Canadian raw material sector, so from peak in the first half of 2007 it was orderly march down till Q1 2009. Still in 2008, HTE manage to return 15% in dividends although valuation suffered by the end of 2008. Closing before buble bursted would have broke me even (considering dividends) or mildly in the black.

Nobody knew when the bubble would burst, so there was no point in timing top. The other side of the coin is totally different - when the market valued HTE 30 cents on a dollar, well... as always this kind of valuations didn't last forever... I planned to double down on HTE at $5... As they dropped dividends 5 times in Q1, 2009, March to May 09 was my window. Should I've done it, I would be in black (just breaking even with dividends considering taxes) even with Koreans buying Canada 50 cents on a dollar.

Where I stand however - once again I failed to follow up and this is what separates guys with big dicks from loosers like me.

4:24PM - Auto industry is in the gutters

With auto industry in the gutters I wondered what can I do to help out? I don't mind committing to pay say $200/month for the next 36 months at 0% APR in exchange for driving a new car. This puts me at around $15K-$16K (taxes, dealer fees, etc included) or around the price for base Honda Fit (if Honda would ever do 0% financing which is unlikely since Fits still sell at MSRP)...

So what new cars are out there?

There is upcoming Kia Soul that looks kinda interesting... that is until you start kicking tires - in test drives it managed meager 31 mpg on highway (Fit does 28/34=31 and 5 door Yaris 29/36=32)... Hmm, real 31 mpg highway ain't as bad in comparison, so unless combined EPA for manual would not come significantly bellow 30mpg (say 27/32=29) for Soul it would be all about pricing. With destination base Yaris goes for $13.7K, base Fit for a bit over $15K, so unless they MSRP base Soul bellow $14K yielding $14.5K with destination it won't be competitive.

Moving one class up we've got Civic Hatchback coming as Honda Insight for around $20K and with 40/50 mpg and bunch of new technology at $3-$5K markup to the class - Mazda3 (Wagon goes for $18.7 and has meager 22/29=25mpg with manual) or Base Civic Sedan (whole $16.5K with destination).... Hybrid would double mpg vs. say Kia or Mazda3 and in say 10 years and 100K would burn 1/2 out of 4000 gallons of gas others would burn, i.e. 2000 gallons less, so as long as they MSRP Insight at $20K and hybrid differential stays $3K, Insight is worth it, but... $2K in government subsidies would make it even more worth it and so would gas prices above $3 also considering that Honda sells at MSRP there is no rush and thus no Insight for me at least for now.

This brings us back to redesigned for 2009 Matrix/Vibe. 2009 models come with Camry's 2.4L I-4 good for 158/162 at 21/28=24 mpg vs. updated 1.8L good for 132/128 at 26/32=28mpg. Interior is the same, mechanics is the same, outside is different and I like Pontiac more. Matrix has a bit more options standard (like AC) and with haggling would come to about the same price as equally equipped Vibe with 2.4L engine (around $17.3 with destination), but with 1.8L Vibe is cheaper then equal Matrix at $17K and that is prior to GM rebate (both offer 0%APR). 1.8L is adequate with manual, so if GM would put $1000 on a hood at $16K 1.8L Vibe would cost about the same as Fit (and probably Kia Soul) and overall would be the best car to get in exchange for committing to pay say $200/month for the next 36 months (or $120 over next 60 months). Cheapest SUV - 4 cyl Kia Sportage would cost $16.7K - $2K in rebate = $14.7K or same as Vibe, yet would guzzle 20/25=22 mpg.

$1000 rebate and 0% for 36 months is perhaps the best one could expect on GM bankruptcy for the above 2 classes. Major incentives however would go to move full size SUV, i.e. roughly $30K behemoths hardly making 20mpg on highway (Say XTerra V6 with 16/20=18 or Explorer or TrailBlazer with 14/20=16mpg). Those would be the best deal with $5K on the hood and 60 months interest free which would make $25K worth of the car cost me $300/month. For example Dodge Magnum SXT with nothing would cost $26K-$5K=$21K-$8K=($13K+$0.5 in dealer fees)*1.08%=$14.5/60=$243/mo for 17/24=20mpg and more performance then 5-series... or Chevy Equinox AWD that burns the same as FWD (17/24=20) would be $25K-$5K=$20K... (FWD is $1.5K $25/mo less, fully loaded LTZ with leaver comes to $29K or $24-$8=$16.5*1.08%=$17.8 or $297/mo... vs. similar but less versatile Escape at $27K (prior to rebates) vs. $28K for base 08 Hybrid selling at MSRP and $29K for 09 Hybrid good for 34/31=32...)

20 mpg vs. 25 mpg is 1000 extra gallons of gas over 10 years or 100K... worth at best $5K, still may be it is worth to buy $25K gas guzzler for $20K, but Matrix is far better package overall, so give me $2K rebate and 36 mo interest free on 2009 1.8L manual Vibe to bring the price down to $15K (same as Kia Sportage or Fit) and that is only when I might be interested. I guess I don't dig SUV after all.

5:13PM - Things to do when bank refuse to pay 5%.

NetBank is failing. NetBank lasted the longest of the first wave of Internet banks. I’ve been banking with them for about 10 years now and as of last couple years nobody could match their CD rates especially with extra 0.3% they’ve been giving me. I guess good times are gone now and there is no reason to lock money in term deposits when current accounts offer 5%, that is unless at least 0,5-1% on top could be found. Could they?
( Read more... )

4:53PM - iPod Touch

Apple got me excited again with their cool gadgets, but once again I will not be buying any of them (the same story repeating itself 3-4 times in the last couple of years). The reason? They sure got cool hardware, but it could do a lot more then the software they wrote for it. Long time ago I used to be able to write my software to make Apple hardware usable - not anymore.
( Read more... )

5:46PM - CANROY - one year later

According to PWE mid-year report on June 22, 2007 the fate of CANROYs got sealed when after 3 readings “SIFT tax” received Royal Assent, so it is official now that starting 2011 Canadian pension plans holder and foreign investors would be paying extra 31% and 26.5% (for 31.5% and 41.5% in total) in taxes to Ottawa. Or will they?( Read more... )

5:19PM - Dollar cost averaging doesn't work either

INTC is my another horror story in 7 years I am barelly breaking even at what I think is the top of the market. Yeah I know, I started with INTC at the end of 2000 and learned that there is no point in catching falling knife and shouldn't have followed "don't fix if it ain't broken" in 2003 and my results would have been better, but hey with INTC I pretty much simulated "dollar cost averaging" starting from the wrong point and/or with the wrong issue.
( Read more... )

3:18PM

MSFT is entering the earning week a hair bellow $30 at $29.81. Back in February I covered with 30 call for $2.35 credit which was a good thing since MSFT didn't get higher then $31.5 making call write earn $0.85 vs. being lucky and selling at the very top. Now, it is a flip of a coin if they assign me (at above $30) or I'll get to keep the stock (at bellow $30).
( Read more... )

1:47PM - UCR and DCR

UCR is a bet that crude would go up when DCR is a bet then crude would go down. They were listed in Dec 2006 with crude around $60, so $1 raise in crude would push UCR up $1 and DCR down $1 assuming efficient arbitrage and liquid market (the later was shown not to exist and thus UCR is at premium and DCR is at discount). Amazingly one could enter one side of the market at no cost and thus for "infinite" profit. ( Read more... )

10:23PM - Spreading

ETF industry got quite creative lately. I did mention bond ETF that could be spreaded to play yeild curve. Now Victoria Asset Management director responsible for USO and lately UNG is not available for comments due to quiet period for gasoline and heating oil ETF placement. That means that probably in the fall we could expect the two (since the scheme is straightforward by now) and that would make it very easy to express a sentiment about the whole energy complex without trading futures.( Read more... )

10:36AM - Bond ETF and spreads

In 2007 they listed huge number of ETFs. No longer the choice is limited to US market indexes (QQQQ, DIA, SPY, etc), commodities (GLD, IAU, SLV, USO) or Euro (FXE). Where it start to get interesting is… well, now you could easily short bonds thru selling short bond ETF and thus could create spread positions. For example, interest rate curve is historically low and sometimes inverted. This is going to change and eventually it would get wider. To profit from this one would sell long bond (10 yr bond) and buy back short bond (2 year). Theoretically, as the curve widens long bond would yield more thus 10 year bond would fall more then 2 year bond. Theoretically the difference would equal exactly how much the curve would widen. It was hard to sell bonds short before, but now it is as easy as anything. This is the theory. In practice, 2-year bond ETF (SHY) paid out in 2006 about 4.13%, while 10 years bond ETF (IEF) paid out about 4.36%, so there is 0.23% interest spread that would be a cost to go short on IEF and long on SHY in addition to transaction costs that would be about $10 to open and $10 to close. Pay-out days are the same, so it is not an issue and spread position would cost nothing in equity if one could match exactly thru odd lots (both SHY and IEF trades around $80 a share so it is not even an issue). So what is a potential for 100 shares position? Say interest rates curve widen 1%, theoretically IEF would fall 1% (or $0.8) or the spread would widen to the whole $80 minus $20 to enter and close, minus 0.23% (or 18.5% a year) or $8000 exposure would yield a whole $40 (or 0.5%) if it would happen within a year. To make the trade profitable the curve needs to widen 1% - 0.5% = 0.5% within a year. To make it worth while and minimize $20 or 0.27% trade cost the exposure needs to be a lot more then $10K. With margin required funds to get into the trade could be halved, or established positions could be used to do the trade requiring no move of cash, still realistically I could not go significantly higher then $50K exposure, or say 500 shares at $80, for $400 in spread-width minus $20, minus $92 a year in carry-cost, for overall $288 profit or 0.72% on exposure. Not a whole lot, but exposure would cost nothing… so those $288 would not be tying anything and money in the bank would earn interest.

It would get a little bit more interesting to spread other issues. Let say 10-years inflation adjusted TIP or corporate high-yield HYG

3:33PM - Car Maintenance

So I finally put my car expenses into a spreadsheet and some interesting things surfaced. Apart from Colt's low maintenance cost that I knew already about, all oil change receipts listed the odometer readings, so I could see how much I’ve been driving since January 1999 when I bought Colt till 2005 when I replaced it with BMW. Not much driving, well, not much lately at least.
( Read more... )

5:58PM - Should I really buy a new car?

Realistically, the reason I look for new car is because of three things

1. We don’t have much space left when we go camping
   
2. We cannot carry skies, canoes and such
   
3. We cannot haul bulky stuff like a TV in a box or pressure washer
   

4:38PM - 323 iT

I started to like E46 while trying to buy another BMW.

11:39PM - Honda Fit vs. Ford Focus

After giving up on Jetta Wagon as the most unreliable car in North America I cross shopped Honda Fit with Ford Focus.
( Read more... )

5:31PM - I will not buy iTV for $299

I missed Apple demo of iTV by two months. Check out new FrontRow running on stripped out MacMini supposed to retail for $299.( Read more... )

10:30PM - Honda'a diesel

This fall “Non-ULSD” warning stickers appeared on gas stations in US and late September Honda announced that they made their diesel ULEV without additional tank for urine (the way DMX decided to address the problem). Honda’s diesel would hit showrooms in the States in 2009 (either as a model year, i.e. available in late 2008 or in 2009 calendar year?) when both VW and MB will not be able to meet new emission standards with theirs old style none urine sipping diesels. Honda will. So might BMW who is testing new diesel and is going to break records in early Dec. 2006 similar to Honda who did that on their diesel Accord.
( Read more... )

1:24AM - - Burning Rubber

Tiff Needell burning rubber got me watching car videos on google all night Saturday... ( Read more... )

5:04PM - Smallest Suzuki 4x4

I like SideKick better especially with its ground effect/2 color paint in Sport trim. Additionally all non-Sport trims had weak 1.6L engine. Sport has 1.8L good for 120hp/114ft-lbs at 22/25 mpg. Sport become available in 1996 and now goes for around $2000. SideKicks were either imported (all 1.8L Sports may be?) or built at CAMI plant that also built Geo Tracker (Tracker only got 1.6L, so it is way underpowered).

5:29PM - So how do you start a car company in XXI century?

There is an Asian way and there is Silicon Valley way.
( Read more... )

5:40PM - Synthetics

I netted $572.49 on writing 24.5 MSFT put at $1.45 call when it crashed to $24 in the end of April and buying it back for $0.25 five months later when MSFT got back to above $27.
( Read more... )