Last year, I had wonderful chats with five successful Canadian business people Arlene, Jim, Kevin, Laurence, Robert (”Dragons” to the fans of Dragons’ Den) and Dianne (host of DD).
The following are part of my video chats with Brett. Feel free to leave a comment or feedback. Enjoy.
I will be posting the other video chats next week. Stay tune.
*******
Engineering & Business school,
Early investment experiences
*******
Early work experiences & Business School
Consumer & Buyer behaviour
*******
I was really lucky to watch a CBC National video report and “discovered” Richard Florida tonight. (smile) I am going to pay attention to Rich’s ideas and I have subscribed to his blog. Check out his latest book - “Who’s Your City?: How the Creative Economy Is Making Where to Live the Most Important Decision of Your Life.”
Here is a video of Rich interviewed by George on The Hour.
The following is an hour long video of Rich speaking at Google, NYC.
And if you are really keen and have nothing better to do (smile), then check out another hour long video of Rich speaking at Google, Headquater in CA (essentially the same speech but with a different set of Q&A starting at 48:45).
P.S. On a personal note, Rich reminds me of some of the great U of Toronto professors that I had. Great job in bringing Rich to Toronto. And I am looking forward to listening to Rich live at Banff World TV Festival.
P.P.S. Here is one of Rich’s recent blog post on Jane Jacobs.
P.P.P.S. I wonder if Rich gets some money from this BMW ad? (smile) By the way, I think I actually first read about Rich here in this UT magazine article.
Great article from Fortune. Here is an excerpt with emphasis,
Before we start in on questions, I would like to tell you about one thing going on recently. It may have some meaning to you if you’re still being taught efficient-market theory, which was standard procedure 25 years ago. But we’ve had a recent illustration of why the theory is misguided. In the past seven or eight or nine weeks, Berkshire has built up a position in auction-rate securities [bonds whose interest rates are periodically reset at auction; for more, see box on page 74] of about $4 billion. And what we have seen there is really quite phenomenal. Every day we get bid lists. The fascinating thing is that on these bid lists, frequently the same credit will appear more than once.
Here’s one from yesterday. We bid on this particular issue - this happens to be Citizens Insurance, which is a creature of the state of Florida. It was set up to take care of hurricane insurance, and it’s backed by premium taxes, and if they have a big hurricane and the fund becomes inadequate, they raise the premium taxes. There’s nothing wrong with the credit. So we bid on three different Citizens securities that day. We got one bid at an 11.33% interest rate. One that we didn’t buy went for 9.87%, and one went for 6.0%. It’s the same bond, the same time, the same dealer. And a big issue. This is not some little anomaly, as they like to say in academic circles every time they find something that disagrees with their theory.
So wild things happen in the markets. And the markets have not gotten more rational over the years. They’ve become more followed. But when people panic, when fear takes over, or when greed takes over, people react just as irrationally as they have in the past. [...]
[Fortune] Your OFHEO example implies you’re not too optimistic about regulation.
[Buffett] Finance has gotten so complex, with so much interdependency. I argued with Alan Greenspan some about this at [Washington Post chairman] Don Graham’s dinner. He would say that you’ve spread risk throughout the world by all these instruments, and now you didn’t have it all concentrated in your banks. But what you’ve done is you’ve interconnected the solvency of institutions to a degree that probably nobody anticipated. And it’s very hard to evaluate. If Bear Stearns had not had a derivatives book, my guess is the Fed wouldn’t have had to do what it did.
[Fortune] Do you find it striking that banks keep looking into their investments and not knowing what they have?
[Buffett] I read a few prospectuses for residential-mortgage-backed securities - mortgages, thousands of mortgages backing them, and then those all tranched into maybe 30 slices. You create a CDO by taking one of the lower tranches of that one and 50 others like it. Now if you’re going to understand that CDO, you’ve got 50-times-300 pages to read, it’s 15,000. If you take one of the lower tranches of the CDO and take 50 of those and create a CDO squared, you’re now up to 750,000 pages to read to understand one security. I mean, it can’t be done. When you start buying tranches of other instruments, nobody knows what the hell they’re doing. It’s ridiculous. And of course, you took a lower tranche of a mortgage-backed security and did 100 of those and thought you were diversifying risk. Hell, they’re all subject to the same thing. I mean, it may be a little different whether they’re in California or Nebraska, but the idea that this is uncorrelated risk and therefore you can take the CDO and call the top 50% of it super-senior - it isn’t super-senior or anything. It’s a bunch of juniors all put together. And the juniors all correlate.
It may be too early to analyze but Google's willingness to bid the minimum $4.6 billion in the recent 700MHz Spectrum Auction to ensure open wireless access for the C-block of specturm. Quoting Google, "As a result of the auction, consumers whose devices use the C-block of spectrum soon will be able to use any wireless device they wish, and download to their devices any applications and content they wish."
Looks like Google played a nice game for itself and the government. Only time will tell if the win is good for Verizon.
Here are some interesting news to read,
Looking at Bear Stearns‘ current trouble reminded me of the mess that Long-Term Capital Management (LTCM) created in 1998. Both companies received bailouts because, as the justification goes, the potential risk of starting a chain reaction that may lead to a meltdown is too high. A failure of one may lead to defaults of the counterparties of the derivative contracts.
Quoting the WSJ (emphasis added),
Of course, the Fed has sponsored bailouts of entities outside its purview before, as when it herded banks to unwind Long-Term Capital Management a decade ago. Then, too, it was concerned about banks’ counterparty exposure to the hedge fund.
That kind of exposure has increased a lot since then through the ballooning derivatives markets. Credit derivatives, which barely existed when LTCM ran aground, now constitute a $50 trillion market, though much of that consists of offsetting contracts. Other derivatives markets have also grown.
This Bloomberg article is a good read as well. Here is an excerpt (emphasis added),
“Lehman has probably the best risk management and has been diversifying for years,” said Mark Williams, a former Federal Reserve official who teaches finance at Boston University School of Management. “But this is no longer about Bear or Lehman. It’s about the erosion and lack of confidence in the financial system. The Wall Street business model is based on ready capital. With rumors, that liquidity they rely on dries up very fast.”
According to Forbes the top of the list of the richest private citizens in the world have change. Warren Buffett is now the richest man, followed by Carlos Slim Helu, and then Bill Gates.
To me, who is the richest man is not as important as who in that group of “rich” people have I learned the most from. And for that, you just need to look at all the blog entries that I have tagged with Warren Buffett to see. (smile) I’ve also tagged a few insightful videos of Warren, including this one.
Quebec is #1 (with a score of 97.0) and Honduras sucks big time (with an almost impossible 0.0) according to the "Survey of Mining Companies: 2007/2008" published by The Fraser Institute. [hat tip: Wallace]
Quoting the Survey,
Along with Quebec, the top 10 scorers on the PPI are Nevada, Finland, Alberta, Manitoba, Chile, Utah, Wyoming, Ireland, and Sweden.
Along with Honduras, the bottom 10 scorers are Zimbabwe, Ecuador, Panama, Bolivia, India, Indonesia, Mongolia, Philippines, and Venezuela.
Setting aside my stats questions and concerns about the survey (see note 1), I've gained some very valuable insights. In particular, I found the "What the Miners Are Saying" section really fascinating to read and wish it is longer and more extensive.
Here is an excerpt of some entries related to Quebec,
Quebec: Refusal of the mines department to enforce their own laws in order to support the industry. A stunning about face and lack of balls (excuse me, leadership) by the government.
—President, Exploration CompanyQuebec [has] a strong but justifiable regulatory regime, evenly and logically applied, supported by government initiatives to promote exploration and development.
—Exploration Company, President
As someone interested in many things China (e.g. her legal and business environment). Here is an excerpt of some entries related to China (emphasis added),
We spent 1.2 years in China trying to get a partnership in a gold property; we spent US$400,000 without being able to have a partnership organized and clear titles.
—Exploration Company, PresidentIn China, despite favorable policies espoused by central government, there is a disconnect with how those [policies] are interpreted and acted upon in the provinces. Also policies/regulations are enshrined [but] impinge on or don’t recognize technical realities.
—Exploration Company, PresidentChina: Virtually impossible to reach a binding legal agreement.
—Exploration Company, PresidentChina’s government works with groups to find solutions to commission mines and create jobs. [K: This seems to be the only positive comment.]
—Exploration Company, ManagerChina [suffers from] uncertainty of land tenure because of the necessity to partner with government entities who prove untrustworthy. After giving our partner in China $300,000+ in cash, land covering the JV [joint venture] area was never transferred into the name of the JV: delay after delay. Finally we gave up on the property and moved out of China. This scenario has been repeated time and time again in China—word is traveling in investment circles that everyone who works in China is getting “ripped off.”
—Exploration Company, ConsultantChina [has] an extremely difficult bureaucratic system.
—Exploration Company, Vice President
*******
Note 1: First of all, I am no statistical expert. But not being an expert has not stopped me from opening my big mouth. (smile) So please consider that yourself warned of my potentially idiotic comments here.
Let me lay out some figures of the surveys as stated in the reports (I have downloaded the previous three years' reports as well).
2007/2008 Survey
Surveys sent to approx. 3000 companies, 372 companies (12.4%) responded. Companies surveyed spent US$1.48 billion, representing a 14.8 percent of total global exploration of $9.99 billion.
2006/2007 Survey
Surveys sent to approx. 3000 companies, 333 companies (11.1%) responded. Companies surveyed spent US$1.02 billion, representing a 14.5 percent of total global exploration of $7.13 billion.
2005/2006 Survey
Surveys sent to approx. 1435 companies, 322 companies (22.4%) responded. Companies surveyed spent US$1.83 billion, representing a 35.9 percent of total global exploration of $5.1 billion.
2004/2005 Survey
Surveys sent to approx. 1121 companies, 259 companies (23.1%) responded. Companies surveyed spent US$574.7 million, representing a 15.1 percent of total global exploration of $3.8 billion.
*******
Here are some of my questions/observations/suggestions,
1) Because the identities of the surveyed companies are confidential, we don't know how different are the companies participating from year to year. Different companies may lead to somewhat different scores and rankings based on the varying level of expertise of the managers in these companies.
2) Comparing the 2007/2008 and 2006/2007 surveys rankings may give a sense of false improvements or worsening as there were 39 more companies participating in the 2007/2008 survey (372 vs 333). And these companies all contribute to the scoring. At the same time, the percentage of total global exploration expenditures represented in the survey hold around 14.5 - 14.8%.
3) The spending of 2005/2006 surveyed companies represented 35.9% of global exploration spending which one may argue is slightly more "trust-worthy" if the money invested can be used as proxy for how "smart" these companies are. (note: In the long run, the companies that make large and bad investments will not last in the industry and their "stupidity" will be self-corrected by their elimination in the survey results.)
4) Expending on the idea in #3, I think the score given by companies should not be equally weighted. There should be some form of weighted measure linking their exploration expenditures (weighted over say a few years (3?)) to their scores they provide. For example, shouldn't the rating given by a company that spent 200 million should be viewed as more "authoritative" than a company that spent 1 million?
As a thought experiment, if the 372 companies are to be divided into two halves based on their dollars invested from the most to the least, I would argue the combined scores of the top half of 186 companies with more investments will be more "insightful" than the bottom 186 companies. Again, this assumes it is meaningful to use the investment dollars of the companies as proxy for their level of "expertise"/"insightfulness"/"smart".
Warren Buffett is one of the richest people in the world and yet he is very generous in his willingness to share his wisdom and insights.
This year, he got CNBC to post a poll to ask people what do they think the Dow Jones Industrials Average will be on December 31, 2099. What's your prediction? And more importantly, why? Warren will share his answer in Berkshire Hathaway's 2007 shareholder letter.
For longer than I can remember, I have been reading and trying to learn from Warren's shareholder letters, and this year will be not exception. Happy reading and learning.
I suggested in a previous blog entry that Mr. David Li, after paying the SEC millions of dollars to settle an insider trading case, should do the honourable thing and resign from both the Executive Council and the Legislative Council of Hong Kong. I am happy to report Mr. Li has finally resigned from the Executive Council of HK,
Now, I hope Mr. Li will do the next honourable thing and resign from the Legislative Council as well.
I previously blogged about a failed high tech solution in releasing EnCana's (a public company) Q3 results and its responsive callback afterwards.
Today, I am happy to report that there is no problem in listening to the company's webcast on the internet and, as a backup, the company has also provided a toll-free phone number to listen to the results announcements and Q&As.
It shows that the company is being responsive to suggestions and I suppose a previous Reg FD complain to SEC might have helped too. (smile)
