Thursday, January 14, 2010

Will Google Leave China?

We will have to watch what happens with this story.

Wednesday, January 13, 2010

Find A New Bank

Here is an interesting movement that aims to get individuals to move their money to another bank and thereby cause the banks to begin treating individual customers with greater care and fewer fees.
How would you evaluate how Canadian banks operate compared to the big banks in the USA?

The Move Your Money Movement Has Legs and Will Travel

Tech Ticker is on to the move your money campaign.

US Taxpayer Bailouts of the Financial Industry Was Not Necessary

Back on March 24, 2009 I shared a post from Tech Ticker that US taxpayers should not be bailing out the big banks.

Since that time the US government has changed the rules for companies accounting for the value of assets on their books. The rules was changed from what was know as "mark to market" which made companies value assets at the value the market would place on them if sold. Since the market had completely dried up for those "toxic assets" which included sub-prime mortgage backed securities, credit default swaps, and many other "financially engineered, synthetic products" called derivatives and what Warren Buffett has called "financial weapons of mass destruction" many companies were faced with the unenviable prospect of having to value these assets at zero dollars on their balance sheets.

Big banks knew that by valuing the aforementioned assets at zero or next to zero it would devastate the wealth of assets held by these companies, other institutional investors and countless individual investors who own equity stakes in those companies if required to make such unimaginable re-valuations. Knowing this, US law-makers changed the law so that companies were required to value assets at their "book value" only. This had the affect that the financial crisis was completely ended in March of 2009 when this change in accounting rules took effect. On that day in March when that law came into force and now requires companies to account for asset values at their original book value or purchase value(until and if they are actually sold and valued again at their sold value) the US stock market has been rising and pricing in the new and higher and artificially inflated asset values.

Those companies are no longer worthless. However, when these investments reach maturity or in the case of derivatives, when their underlying counter-party contracts expire, their real value which is closer to zero, will have to be realized. At that point these companies will be in for difficult times again.

Volkswagen Stock

On June 20, 2007, I predicted that Volkswagen stock would be a great investment. It turns out that it was the best performing large cap stock in 2008. stock price peaked in October of 2008 and has since come back to a level which makes it a buy again at these valuations.