Monday, August 28, 2006

Don't say I didn't warn you

Reading a story in today's Globe on how the current consolidation wave in the mining industry is creating a void of blue-chip Canadian resource companies has got me thinking -- why all the fuss over buying expensive companies?

"What do you expect when resource prices are where they are," George Vasic, a strategist at UBS is quoted as saying in the article. "Nobody is taking them over when copper is at 50 cents and gold is at $250."

Well pardon me, but why weren't they? I don't understand why all these companies are clamouring over each other, trying to outbid themselves on $16, $18, $20-billion nickel firms like Inco and Falconbridge, when they could have had them for a fraction of that a few years ago, back when everybody and their mother wasn't obsessed with all things base-metallic.

If buying Inco is such a "bold, strategic move" for Phelps Dodge or CVRD now, while the stock is worth nearly $80, why wasn't it a good idea in 2002 when you could have had it for $20? Aren't you supposed to try to buy the $80 company for $20, not the opposite? That's the sort of question I think the shareholders of these grab-happy miners need to ask of the management that run their companies for them. That, or face a sink-hole acquisition of Time Warner / AOL-like proportions.

What happens when Chinese demand slows by a single iota, and all of a sudden there isn't a ready-made market for all of Sudbury's dirt? It strikes me that in their zeal to drive the resources bandwagon, a lot of these firms are ignoring a fundamental tenet of investing: buy low, and sell high.

A few years down the line, I suspect they might be reminded of that.

Sunday, August 20, 2006

An oldie, but a goodie.

Kudos to Ramit over at I will teach you to be rich for summing up my thoughts on why it's important for young people to get educated about money now. He sums up every single reason I could think of for why I think it's so important for twentysomethings like me to get active in their lives and in their finances as soon as possible. You're only young once. I wish I'd found it sooner so I could e-mail it to everyone I know.

It's just a great post.

Friday, August 11, 2006

Turning around -- slowly

I've been a diligent little saver this summer (still a ways off my ambitious net-worth-of-$20,000-by-September pledge, but that's largely due to my existing investments tanking so impressively. But I digress. I'll formally update my progress soon.)

As such, I've amassed a tidy little sum that I've earmarked for an RRSP contribution. I had planned on throwing some cash into a stock I've had my eye on for the better part of a year now -- the horrendously battered publisher Quebecor World Inc.

I pegged it as a potential turnaround story a while back, based on some of the industry's fundamentals. It lost more than 50% of its value last year, yet still pays a dividend (albeit a slashed one) so those two factors attracted me. But something still isn't quite right to justify me jumping in.

I still think the stock has potential, but everything I've been reading and hearing about that industry lead me to believe that it hasn't quite hit bottom yet. Overcapacity is eating into revenues at a time when costs are escalating due to staffing. That's a bad mix. Not exactly a big neon "VALUE STOCK" hanging outside.

I still like the stock long term, but since I'm expecting it to drop a little more before eventually beginning its turnaround hopefully some time in late 2007, there's no rush to buy in just now.

As such, I've decided to park my money in the iShares REIT ETF, ticker symbol XRE on the TSX instead. I've wanted to get into the REIT game for a while, and since I'm not getting the "full speed ahead" sign about any given REIT over any other, I think I'm going to go with the whole bundle and play it safe.

After my initial research, Dundee and Boardwalk REITs looked appealing to me due to their focus on grabbing assets in Western Canada's burgeoning office market. But right now, I'm leaning away from putting my eggs in one basket, so I'll be putting an order in for $3000 worth of XRE early next week.

If you happen to be selling at the time, thanks for the units. Unless of course they tank, in which case I'll probably be calling you in six months, saying "hey buddy, wanna switch back?"

Sunday, August 06, 2006

I still exist

I haven't dropped off the face of the earth. I'm just taking a customary summer hiatus from blogging, what with the other worthwhile things we have to do with our lives while the weather's nice.

I'll be back soon with a lot to say on a myriad of personal finance topics -- not the least of which will be the smell of death that's emanating from my Biovail shares after last week's carnage.

You've got to hand it to those guys. It's not often that the same company can be investigated by the OSC on one day, and have the stock hammered by an absolutely devastating patent ruling the next. That's just a special company.

Sometimes I think all Biovail needs is to have a pack of coyotes circling the podium, growling and slowing inching toward the speaker during every press conference they have to report their underwhelming earnings.