Why I bought Starbucks

In 2008, I was so mentally ravaged by my dwindling investments that I failed to notice that, coffee was recession proof (not that I had too much appetite for investing back then). 

Then, in 2011, I decided to invest in a coffee company after I realized that, regardless of economic circumstances, people need to get their caffeine fix on a regular basis. I looked into Tim Hortons and Starbucks. I don’t mean analyzing their numbers as an astute investor would do, I mean I literally walked into some of the stores and looked at the people inside.

And I made the following totally erroneous observations:

Tim Hortons

This is the coffee store of the working class, for the men who work on the oil sands and in the diamond mines, of the frozen North, who build the roads and log the trees.
For these men, Friday night is always pub night. The 'All Inclusive' Mexico package is the ultimate vacation. A burger and fries is the best meal; a 6 pack the best drink. Family nights out are at McDonald's. They drive SUVs because how else could they have the barbeque and the fridge ready for any outdoor adventure.

Starbucks

This is the coffee store of the artistic crowd, those who write letters to the editor deploring the loss of habitat for the barn swallow, and read the labels on the food to avoid the bad fats.

They ask the waiter whether the chicken comes from a farm where they are humanely treated or whether the salmon is wild and the waiter answers that is so wild it took the trawler several weeks to catch a full load and they can pinpoint on Google Maps where the salmon was caught. They are the people who read thick, heavy books, and pay to see exhibitions like 'Shamanism in the Rapa Nui Island' or 'Art of Embroidery in the Xin Dinasty.’

They listen to CBC Radio 2 and the cable companies desperately try to convince them to subscribe again (as they canceled long time ago their TV subscriptions) adding to the list of channels a few ones with the word 'Culture' in the name and promises that the viewers will be able to watch series as Soviet collectivization movies or best of the black and white Albanian movies from the communist regime.

And I chose Starbucks because it seems more glamorous and focused on international expansion.

The upper middle class in China will go to a Starbucks and have their daily coffee as drinking tea like all their generations before is boring and those who did not make it yet will go to a Starbucks and spend half of what they have earned that day on a burnt (so I was told and my impression was the same) coffee dreaming of the day they would come daily to the Starbucks store and that will be a sign they have made it. In China and India Starbucks will be the place to go to and to be seen.

And I have a dream that one billion, no, let’s make it two billion - after all it is my dream and I can dream whatever I want - people will go to a Starbucks at least once a week!

Seattle, the Starbucks store with the second largest traffic in the US (according to a tour guide)

'Not too busy inside for the 2nd largest traffic Starbucks store (no wonder the stock is down)' This is the comment for the photo I took 4 years ago.
While I made this wisecrack joke the stock was $15.56.
On Friday 28 December, the closing price was $52.64. 
The joke is on me.

The Eagle that Turned Out to Be a Turkey

It is Eagle Energy Trust (EGL-UN.TO) that came with recommendations from a friend who uses a financial adviser for his account and from Mich (www.beatingtheindex.com) whom I still trust, at least more than me :).

My friend sent me some time 10 months ago an e-mail with the subject 'load up, boys', he said target price was $14.5 to 20, 10% yield at that moment and they were a 'bunch of Income Trust refugees who are doing it in the States now, protected from Harper taxation'.

It sounded good (but not that kind of good not to be true), I 'loaded up' and that proved fatal not only for me and my wife's account but everyone else who still has the stock.
Eagle Energy Trust 2013 Outlook

Average buying price: around $11
Price now: $7.9

And here comes the turkey

Sleepy Mini Portfolio

http://www.canadiancapitalist.com/sleepy-mini-portfolio-q4-2012-update/

Readers are often curious about the annualized returns of the Sleepy Mini Portfolio. It is easy to calculate using the XIRR function in Microsoft Excel. Plugging in the dates, contributions and the current portfolio value tells us that the Sleepy Mini Portfolio returned an annualized 5.3 percent over the past five years.

I wish I had employed the same strategy or one close to it (just buy ETFs using my Interactive Brokers account) instead of chasing the elusive ten baggers.

I would have laughed all the way to the bank but now I am crying all the time when I check my account.

My Darling Stock Interrent (IIP.UN)

This is one of my very few success stories. I wanted to invest in an apartment REIT but it wasn’t easy to find it. There seem to be many commercial, office or industrial REITs but not apartment REITs. So I found IIP with a dividend around 8% and bought 1,000 (yes, I know this how small I play) shares at around 1.51 in Feb/Mar 2011. The stock had been hovering around this price and even lower for a long time.

I would have bought more but I did not have any cash at the moment and the financial nightmare of 2008 taught me not to leverage even if in some cases I should have (only a little). I would have liked to buy another 1,000 shares. After a while I had the money but the stock was at that moment around $2.2 and I did not want to pay 50% more for a stock even if I should have as the yield was still the appealing 5.4%.

My darling stock more than doubled at some point and it went over $4.00. It would have been nice to own 2,000 shares at that moment (however, I would have sold half of them at $3; this is my dream, most of the stocks I have to double, I sell half and I do not care what happens with the rest as I got my money back). So I 'panicked' (not to mention it was nice to make some profit for a change) and sold 300 shares. The share price did not make sense and sure the stock fell back then to $3.85, but today Dec 12 stands at $5.28!!!

What gives? What I am missing here? However, the answer seems to be here:
In their quarterly report, Mawer Investment Management noted that an average home costs 84% more in Canada than the U.S. ($372,762 versus $203,100). Also a Economist Magazine survey shows that Canada’s housing market is 54% overvalued, only slightly behind Singapore, Hong Kong and Belgium. On the same measure, the U. market is 19% undervalued.
The investor Francis Chou said in a recent report, “If there is a choice, it is better to rent rather than buy a house.”

So more people will have to rent because of the low affordability of the houses in Canada. 

Here are some of their properties. Aren’t they cute? $0.0000000000001 from everyone’s rent goes to me. I would like to wait at the each building’s door, hug everyone and say ‘Thank you!

Single-Handedly Stopped Apple!

A few weeks (or was it months?) I bought Apple at $674.88.

When the stock was $500 I had thought it cannot go higher and it did.
But the madness must end, and singlehandedly I said would stop the rise of the Apple stock by buying it .
They won against Samsung but not against me :).

And the stock went up to $705 then as expected it started its decline. Sorry Apple shareholders!

However, yesterday I bought one share of Apple. Perhaps my curse is over, not to mention I read a few titles about the launch of iPhone 5 in China and if I am not mistaken the largest telecom company in China is going to carry an iPhone for the first time.
And the drop in the Apple share price might be attributed to the 'financial cliff'. The shareholders who have a profit decided to sell in order to pay capital gains at the current rate.

My Tweets for November

'RT @BorowitzReport: BREAKING: Sheldon Adelson Wonders If One More Billion Would Have Made a Difference'
No wonder LVS has gone down.

Waiting at lawyer's. Hope i'll not forget my lunch bag. Nothing left for them to eat them but they will charge me for holding it.

'Financial cliff' will be the word of 2012.

Some Republicans think that 2+1=4. Some would even say it is 5 (about balancing the budget).

I wish I could tell this to the management where I work. I'll fail for 10 years but eventually I will succeed.

Barrack Obama: 'I've failed for the first 4 years and that is why I won the election'

US spends more on military than next 10 countries together. They spend more on healthcare or education or public transport or ... than US. I am amazed how many countries got their priorities wrong.

Lawyers and insurance companies, I don't ever want to have to deal with them.

'RT @nxthompson: National vote total finalized. Hilariously, Mitt Romney got 47 Percent.'

He got 47.9% but it makes a good tweet.

Curious how many of the 47% voted with Mitt Romney only to prove him wrong in his statement.

'Make love not war' said Generals David Petraeus and John Allen and they acted accordingly.

'RT @BorowitzReport: How To Tell If You're Involved in the Petraeus Scandal: http://nyr.kr/W1jcgI' 
My solution http://bit.ly/RWt5I2 

There is no Thanksgiving for turkeys. It is the saddest week for them.

Unfollowed @jaltucher, sorry James but I wanted to read tweets from you not from other people by RT. I'll keep reading your blog.

@jaltucher had 50,000 followers. By unfollowing him he now has 49,999. Is this a sign? How should I interpret it :)?

Went to showroom of a bath renovation company and yes I had one.

Mr. Clean Febreeze, mix 60 ml with 4 l of water! Why didn't they make the cup 60 ml, how would I measure it?

'RT @RusseIIPeters: "Follow @MrSalDizzle and I will shout you out. Retweet this when done."

I follow him now. Shout me out Mr. Peters!

By the way I have no idea what 'I will shout you out' means.

I am so boring I talk loud when I am in bed to fall asleep.

'Andy Borowitz ‏@BorowitzReport

Mitt Romney will visit the White House tomorrow, which will be the first time he has spoken to a black person since the last debate.'

I RT because I cannot come up myself with something as good.

From BRIC to BRICIT to BRICITMENP

Long time ago I came across the term BRICIT (the BRIC countries, everyone knows of, + Indonesia and Turkey) so I decided to coin the term BRICITMENP ( + Mexico, Egypt, Nigeria, Pakistan).

Chances are I am the first person in the world to have come up with this term so I stake my claim for glory. Let the world acknowledge it.

But I will have to become a chief economist or someone important somewhere so that Wikipedia has an entry for BRICITMENP where they will mention my name as they do now for BRIC.

The acronym was coined by Jim O'Neill in a 2001 paper entitled "Building Better Global Economic BRICs".The acronym has come into widespread use as a symbol of the shift in global economic power away from the developed G7 economies towards the developing world.

Jim O'Neill is presently the Chairman of Goldman Sachs Asset Management. He was previously head of global economic research and commodities and strategy research at Goldman Sachs.He is best known for his prominent economic thesis regarding the economically related nations referred to as BRICs (Brazil, Russia, India and China). He coined the phrase in a 2001 paper entitled "The World Needs Better Economic BRICs."

Michael Campbell's (MONEYTALKS) Workshop

I like to listen to his radio show and of course when he sent an e-mail about his workshop I read it but I felt something was wrong, it seemed too good. How come, you only win, you can't lose at all?

"For example, as I write this GLD is selling at $1600. Right now I can sell someone the right to sell me GLD at $1600 any day up until January 18th next year and I will receive $102 per ounce. In other words if he sells me the gold my cost will be $1498 – and if he doesn’t sell it to me (because he could sell gold for more in the open market), then I keep the $102 per ounce he paid me. And I can sell another put."

And actually you can lose, if the gold falls under $1498, but he didn't say this in the e-mail?

I would not implement this strategy - even if I learned how to - but I would invest with Michael Campbell, I would prefer to pay a fee rather than being emotionally involved buying and selling options.

I wrote to him to set up a fund that would implement this strategy and I am sure there are more people like me who would buy into this fund.
He didn't answer and I suppose he will not do it, too complicated, it is simpler to do a workshop.

No More Chinese Companies

I inquired about a company (I only knew it was operating in an emerging market) and when I opened the prospect I cringed.

No More Chinese Companies

Why's that?

CHINA ELECTRIC MOTOR INC (CELM): bought at $7.37, now $0.07 (no, it is not a typo);

LONGTOP FINL TECHS ADR (my statement doesn't show any symbol, the company must have been de-listed): bought at $38.13, now $0.03 (again not a typo);

CHINA AGRITECH (CAGC): bought at $5.97, now $0.29.

SINO-FOREST delisted

Now you know the answer. And all of them with the exception of the last one were recommended in a paid subscription for a financial newsletter (perhaps with the exception of CAGC) so they were not bought on a whim - I have my fair share of them but not these ones - the above companies were analyzed by knowledgeable, smart people.

So my warning to everyone, do not invest in Chinese companies.

I know there are companies who have fared well, but think of what could happen.

The U.S. government will default on their huge debt and China will have to confiscate the American investments to recover some of their money. Or the U.S. will start an after WWI Germany style inflation in order to pay off the debt and China would need to respond somehow again by confiscating American investments. Hope they will not start the WWIII or even threaten with one over this issue.

United States owes China

Best TV political ad I have seen in a long time

Ring the Nasdaq Opening Bell with Questrade

It is a contest and if I win and ring the bell - mark my words - the market will collapse! Prepare to heavily short the markets then. It will be the blackest of all black Mondays or Thursdays or Fridays or all the other working days of the week.

Mega Uranium

I liked this company: it had 'Mega' and 'Uranium' in its name and it had a mine in the business friendly Australia. I bought the stock close to its peak when Uranium seemed to become one of the most precious commodities. I averaged it down but to no avail.

Average cost: $3
Price now     : $0.14

The Big Board

Yes, I am like them!

From the book 'Slaughterhouse-five', by Kurt Vonnegut:

"It was about an Earthling man and woman who were kidnapped by extra-terrestrials. They were put on display in a zoo on a planet called Zircon-212.

These fictitious people in the zoo had a big board supposedly showing stock market quotations and commodity prices along one wall of their habitat, and a news ticker and a telephone that was supposedly connected to a brokerage on Earth. The creatures on Zircon-212 told their captives that they had invested a million dollars for them back on Earth, and that it was up to the captives to manage it so that they would be fabulously wealthy when they were returned to Earth.

The telephone and the big board and the ticker were all fakes, of course. They were simply stimulants to make the Earthlings perform vividly for the crowds at the zoo–to make them jump up and down and cheer, or gloat, or sulk, or tear their hair, to be scared shitless or to feel as contented as babies in their mothers’ arms.

The Earthlings did very well on paper. That was part of the rigging, of course. And religion got mixed up in it, too. The news ticker reminded them that the President of the United States had declared National Prayer Week, and that everybody should pray. The Earthlings had had a bad week on the market before that. They had lost a small fortune in olive oil futures. So they gave praying a whirl.

It worked. Olive oil went up."