Canada to buy half of Hawaii?

You guys can take a look and comment whether this is true or not

http://finance.sympatico.ca/news/ContentPosting?newsitemid=bfb638d2-3b51-4806-9fca-d74f1723dcf3&feedname=foolish&show=False&number=0&showbyline=True&subtitle=&detect=&abc=abc&date=False

This is extremely shocking to me. US is selling half of Hawaii to Canada to repay the deficit? I personally think that Hawaii is a valuable land for military and tourism. There is no way that US will sell this piece of land. There might be rumors but I don't think this will ever go through.

However, if this really is the deal, I can say is US is in major trouble with their deficit. Watch out for the stock market for tomorrow.

MC

You Should Know Who He Is

Michael Porter / Porter 5 Forces Theory

Do not Say you study finance if you do not know this guy

Thanks
Paul

Auction?

Hi, folks

Is Tuesday in Vancouver. I believe there are nothing much to read except to wait for the result of the Employment Situation data which will be released on Friday.

So why not spend some time to watch something which might consider to be a long term investment?

http://www.freemansauction.com/

General public bid things on EBAY

How about the RICH?

Hope you guys enjoy it

Thanks

Paul

(By the way, this company hold the auction for Lehman Brothers' Drawings & Paintings when it closed down last year)

Swing

Thanks for my friend for reminding me there is a phase call swing trade. Yes, if you have been smart enough to join the swing game in the past few months, I guess you have gained some profit already. So back to the topic, what swing should we joint?

In my point of view, joining the swing game in oil is the safest in recent, at least for the coming week.

• High oil price hurt economic, especially those who are unemployed. Around 10% of unemployed people are traveling around daily to find their right job. High oil price gonna hurt them a lot. Only this particular factor should capped the oil price in $85.00 USD
• Even the unemployment rate decline to 9.5%, which shall happen in the coming months, thats does not help to boost the oil price more than $90.
• Thus, oil price is being capped for sure. Not only by the supply and demand effect, but also from the perspective of the government
• How about the lower cap? Yes, oil price that are too low, lower than $75 USD will hurt oil company. If the oil company close down or infant more un-employees, the market is being hurt in another way. So Oil price shall not be lower than $75 USD.
• Supporting point will be the stock call XOM, is only $3.00 USD from its 52 week low. What does that mean? It means that low oil price really destroy these oil company profit. But who cares these big corporation profit when you are unemployed.
• So on the supply and demand factor and on the government side, oil price cannot be too low, otherwise, the economic will be hurt on the back side

To conclude, 75-85 will be the big range, 79-83 will be the middle range, 80-82 will be the small range.

If you have loads of money, do it in small range. You know what I mean.

Finally, me and mic think that UCO AND SCO ETF shall assist you in exploding yourself in oil market.

Thanks

Paul

Merge & Acquisitions

On 12th February 2010, Berkshire Hathaway Inc. announced to merge with Burlington Northern Santa Fe Corporation (BNSF).

The M&A details

Omaha, NE (NYSE: BRK.A; BRK.B) – Berkshire Hathaway Inc. (“Berkshire”) today announced the closing of the merger of Burlington Northern Santa Fe Corporation (“BNSF”) with and into a subsidiary of Berkshire. Berkshire also announced the final results for the merger consideration elections made by BNSF shareholders.

The exchange agent for the merger, Wells Fargo Shareowner Services, has calculated that of the 264,507,424 shares of BNSF common stock outstanding as of the effective time of the merger (which excludes shares of BNSF common stock owned by Berkshire and its subsidiaries, all of which were canceled without payment at the effective time), cash elections were made with respect to 108,054,170 shares, or 40.85%, and stock elections were made with respect to 114,692,846, or 43.36%. “No election” was made, or deemed to have been made, with respect to the remaining shares.

Based on the election results and the terms of the merger agreement:
- For all BNSF shares for which cash elections were made, shareholders will receive cash;
- For all BNSF shares for which “no election” was made, or deemed to have been made, shareholders will receive cash; and
- For all BNSF shares for which stock elections were made, shareholders will receive approximately 92.25% of their consideration in Berkshire stock and the remainder in cash.

In the aggregate, Berkshire will
• Pay approximately $15.87 billion in cash (FROM DEBT)
• Issue approximately 80,932 shares of Berkshire Class A Common Stock (NEW ISSUED)
• Approximately 21 million shares of Berkshire Class B Common Stock pursuant to the merger. (NEW ISSUED)

The total comes to approximately 44 billion to buy out the remaining 77.4% of BNSF Railway.

In percentage, Berkshire uses
• 36.06818182 % in Cash
• 63.39318181 % in Equity to buy out BNSF.

The M&A Analysis

So what can we interrupt from the numbers?

First of all, we have to understand there is a great difference between a cash offer and a stock offer in M&A.

In a 100% cash offer, the acquirer assumes the risk and receives the potential reward from the merger, while the gain for the shareholders is limited to the takeover premium. If an acquirer makes a cash offer in a deal, but the synergies (Profit afterward) realized are greater than expected, the takeover premium for a target would remain unchanged while the acquirer reaps the additional reward and vice verse.

In a 100% stock offer, some of the risks and potential rewards from the merger shift to the target firm. When the target receives stock as a payment, the target’s shareholders become part owner of the acquiring company. This means that if estimates of the potential synergies are wrong, the target will share in the upside if the actual synergies exceed expectations.

Yet, the deal which BRK and BNSF ended is 36% in CASH, 64% in STOCK. In fact, if you are detail enough, you can figure out that BRK prefer cash offer than stock offer. From the M&A details, we can see that “for all BNSF shares for which “no election” was made, or deemed to have been made, shareholders will receive cash.”

This reveals that BRK is confident in the synergies (potential earning). On the other hand, shareholders from BNSF seem to be even more confident in the synergies (potential earning). They will like to have stock offer more than cash offer.

After all, you should know where are your synergies.


Thanks
Paul

Oil price too high?

Hi

Just to mention again, I am from Vancouver studying Economics. Today, I want to talk about this local city I am living in.

Last night at around 3 A.M, I popped out from bed and read an article when I was half asleep. It talked about how $3/gallon for oil price hurt the economy. After I finished reading it, it made me anger for the Vancouver government.

Vancouver is a city where GPD are fairly low than other cities in North America. However, they are currently charging $1.14 CAN/litre. That is around 3.6/gallon. It is defintely not the demand that is making the price being so high. The main reason is the high tax on gasoline. In Vancouver, there is a 20.5 cents/litre of genral tax plus 5 cents/litre of gas each consumer purchases goes to the public transportation monopoly Translink. "In 2008, taxes in Canada represented on average 35% of the pump price versus 20% in the U.S. Taxes include a Federal Excise Tax of 10.0¢ for Regular, 4.0¢ for Diesel and Provincial Tax"(http://www.vancouvergasprices.com/can_tax_info.aspx).

This will hurt the local economy and I don't know what is in the government's mind.
I really hope that the government in Vancouver can lower the gasoline tax as well as other taxes such as the income tax. According to the Lafer curve in Economics, marginal revenue starts decreases when the taxes are too high. I think Vancouver has reached the top point. Thus, I hope the government to create more job opportunies instead of continuing to raise tax to cover the deficit.

Thanks

MC

Greenspan's Afternoon Call

Green Span Blew It

Thanks
Paul

What is going on with natural gas?

March 17, 2010

Natural gas has been dropping for the past 1.75 years. In the past month, it has been dipping almost every day. It seems it is in total control of the gravity. The question is What is going on with natural gas? When will it hit bottom?

According to www.bloomberg.com, today's future natrual gas price is:
NATURAL GAS FUTR (USD/MMBtu) 4.301.

While crude oil is rising, natural gas is dropping. Most of the headlines about natural gas are supply are increasing and demand for it is dropping because of global warming.

However, for long term investment, I think it is a good time to buy. Demand will definitely increase when production increases. Demand for natural gas is going to recover sooner or later. It is a little slower than crude oil.

Also, I have been reading some scientific magazine saying that in the year 2012, temperature will drop dramatically. It is just part of the nature cycle. I personally don't believe in global warming. As a result, I will use some of my liquidity to purchase some natural gas.

Thanks

MC

Having the Olympics in Vancouver is a Fatal mistake

Hi

I have currently joined the "2010 learning legacies competition" writing and analyzing the impacts to Vancouver in the future from the Winter Olympics that have just ended. I have just started my introduction and I hope to finish the essay before March 15.

Having the Olympics in Vancouver is a Fatal mistake

Do you enjoy the opening ceremony in Vancouver? Yes, it looks very nice but there is a cost for it. According to CBC news in 2006, the Olympic games in Montreal back in 1976, it took thirty years to run out of deficit. Will Vancouver follow the same path as Montreal? The answer is definitely yes and the taxpayers are the ones that are going to suffer from it. At the point of March 2,2010, the cost of the Vancouver 2010 games are at least 8.7 billions and counting (UBYSSEY 2010). Most of the costs are off budget and the toughest days are yet to come.

Thanks

MC