2007 Q1

MAJOR MOVEMENTS

I didn’t follow through with my original plan set forth during 2006 Q3. As a consequence both stock suffered tremendously during the market crash of February 26th. The crash was triggered by a sudden plunge of 8% in the Asian market when investors decided to sell to lock in some profit after the Chinese government’s announcement to look into applying taxes in the investment vehicle. Later, this was compounded by bankruptcy filings of subprime mortgage lenders. This was a ripple from the California housing market crash originated about 6 or 9 months ago. This has the unfortunate effect of affecting Canada’s housing market.

THINGS TO NOTE

Intel pulled off a brilliant move by timing the release of several new processors while slashing existing processors prices with the merger of ATI and AMD. The move forced the new AMD/ATI into cash flow problems as a consequence, AMD/ATI’s stock price plumetted to $12. It’s looking more and more delicious to me, but still not low enough. Analysts predict that AMD/ATI won’t have enough cash flow to last till June.

Boston scientific, the heart stent and cardio defibrillator maker is surprisingly facing even more lawsuit ONE YEAR AFTER. The scavengers took their sweet time which I didn’t predict. Add that to numerous studies that are just coming out now about how the heart stent doesn’t increase the chance of survival compared to traditional medicin treatment. The news combined brought the stock down to its current lowest point. Despite the fact, the ideas remains the same. Americans will get fatter and when it comes to the matters of heart, no one want to take a chance. The faster the solution, the better.

CHANGE OF DIRECTION

It seems that my predictions set forth in 2006 Q3 was pretty accurate and yes, I should’ve followed it looking at the 10% drop in equity value, however, I do not intend to compete with the day traders. What I have at my disposal are two very strong advantages: that of time and patience. The stocks I’ve chosen all have very strong capital and can withstand a recession if worst comes to worst. I’ve bought them at a relatively low price and now is just a matter of waiting for them to get back up. The only one I am worried about is CREAF. It was one of the play stock I bought and recent event has stripped it of its potential. It was one of the stock I bought based on the theory of large numbers. Well, since I only spent $3000 on it, it doesn’t hurt to keep holding on to it anyway.

I also took up some debt to generate income. My first flirt with hedging money to earn money. It was tempting to use the borrowed $12000 to invest in some stock, but I was strong enough to stop myself. Had I done that, I would’ve suffered the 10% drop in total value during the Feb 26th crash and be very deep in shit right now.

I explored more into Canadian market this year and picked up Tim Horton’s stock along the way. I intend on increasing my holding in the next quarter as well but am holding still for the expected low cycle to run its course first. Coffee is a seasonal thing and Q1 of the year should be the worst. The reason why I want to get into the Canadian market is for tax reasons. Foreign dividends are considered as interest income while Canadian dividends enjoy a huge tax cut. at a near 50% tax rate (see this post for how I arrived at this conclusion), reducing tax is the most important aspect of investing in Canada.