Blessed by the Potato

Nikki made a cookie.

A big cookie.

A giant, beautiful cookie that deserves respect. And I will pay my respects, right now: that was a damned fine-looking cookie. But then the respects went too far: “Best cookie ever!!” Sam exclaimed. Hey, whoa there, let’s not get ahead of ourselves. It is a most excellent and large cookie, but, I told them, I hold the title to best cookie ever… unless this is a bake-off challenge?

“Bring it, beeyatch.” – Nikki.

The oven mitt has been thrown down, and the challenge is on! May the best cookie win!

My bork-bork-bork-fu is strong, and at the risk of falling into hubris, I think I’ve got this one in the bag. I’m going to be bringing my chocolate brownie cookies to this battle.

See you tomorrow.

Time, I suppose, for another round-up links post. Writing went much better this week, but I have completely fucked up my sleep schedule, and the diet was out the window.

Some webcomics I haven’t seen before:

Buttersafe: I will never understand bees. Pajamaforest: Zing fail, It’s a date.

A quick post at the Globe and Mail about finance pay scales compared to other professions. As a scientist, I do have to lament the misallocation of resources in our society towards the allocators of capital. Don’t get me wrong: someone has to do that job (capital is but one of the world’s limited resources), but I don’t think it’s a profession that should be sucking away our best and brightest (especially if they insist on blowing up the economy every other decade).

Xceed mortgage, a subprime lender in Canada (they do exist!) is having trouble getting financing, and is not renewing mortgages of its clients. It’s no longer accepting mortgage applications from new customers. Though I expect most people with schedule 1 banks will have no problem renewing their mortgage even if they’re underwater in the future (though I expect some loss of negotiating power on rate), this should serve as a reminder that a renewal is not guaranteed, even if you’ve made all your payments!

A neat youtube video on side-scrollers and moving your own body with a 3rd-person perception.

Whiterock (WRK.UN) is once again doing a share split, 3-for-2. I don’t know why they keep splitting the shares: $20 is not exactly dear, especially for a REIT. I suppose it might help a few investors with synthetic DRIPs get more whole shares, but these arrangements do have a cost. A trivial one, perhaps, but not zero. I don’t get why management doesn’t just wait until it’s high enough for a 2-for-1 split. Last time this happened I sold a chunk just because I didn’t like the taste of the shenanigans, even though I still thought Whiterock was undervalued (and boy was it: WRK.UN returned approx 85% from that sale). I think in an absolute sense it’s fully valued now, but since the rest of the REITs are also up huge over the last year, I still think it’s just a touch undervalued on a relative basis, so this time I won’t sell my last little chunk of it, even though I don’t like the whiff of share price manipulation that the frequent splits suggest.

Netbug shares this video of a ketchup-dispensing robot and I have to say, if this robot neatly dispensed an appropriate amount of ketchup, the video probably wouldn’t be worth watching. I don’t know what that says about the human condition, but I’m sure it’s worth reflecting on.

How stupid are US kids that these need to be banned so they won’t choke on them? What else might they choke on? Pebbles? Bits of food? Food wrappers? Screws? Cat toys? Their socks? Where does the madness end? Does the US border guard, tasked with keeping terrorists and science fiction writers in line really need to worry about a single Kinder Surprise egg? (It’s not even like she was trying to smuggle in a case of them as contrabrand).

For fans of Community: “Fact: In 100% of fake gun related shootings, the victim is always the one with the fake gun.”

Note: I am not actually alleging fraud myself in any of these cases. I have for the most part not looked into the stories one way or the other except for personal interest. Despite the fact that I love reading the stories of the investigations of short sellers, I am not myself a short seller, and hold no position in any companies mentioned.

John Hempton brought to light the case of a Chinese internet-based travel agent with a non-functional website, over the course of several posts. Though I found the reporting to be a great read, UTA is up ~40% since JH published his research. An even better time to short, or was the thesis wrong? Unfortunately I’m not going to invest the time to look into it for you, so you’ll have to figure it out yourself, or wait for the fullness of time (like me).

Kerrisdale Capital (registration may be required to view post) goes into great detail outlining another case of a Chinese private education company with again, a non-functioning website, and a teaching facility with no desks for students. It’s actually rather amazing the amount of work they went into their investigation, and to me at least, their report reads like a financial detective thriller. They also outline the mechanism of profiting from the fraud, as well as another way of spotting one: they issue more shares when the share price is high, with no concrete need or plan for the cash. The cash just sits there, despite the ostensibly high earnings growth rate.

One of the interesting parts of the Bronte Capital post was that the amount of interest income they were reporting on their income statement didn’t jive with the amount of cash they had on hand. There’s a post at Seeking Alpha on that topic.

Financial Uproar had a post recently looking at a Chinese small-cap that had my magic words “trading for less than the cash on the balance sheet.” Unfortunately, the company is mired in an accounting scandal, with class-action lawsuits mounting, and the filing of their latest quarterly results weeks late now. Using the quick John Hempton test, I looked at the most recent available data I could find: they have something like $90M in cash, and are trading at a market cap of $80M. However, that big cash stockpile made something like 25 bp of interest income in the last quarter, which is suspiciously low. Moreover, they didn’t pay down at all a revolving line of credit — why keep a LoC open with cash on hand doing nothing? Something smells funny here. If this were a local Canadian small-cap, trading this cheaply, I’d be tempted to investigate further, maybe try to figure out who was right in the accounting dispute and whether there was any business activity to back up the statements. But it’s not Canadian, it’s Chinese, so there’s really nothing more I can do but examine the financial statements, and those are now definitely suspect. Like I said at the beginning, I’m not a short seller, but I am very good at staying the hell away from stuff, and that’s exactly what I intend on doing here.

There are enough of these stories out there that I’m even worried about investing in China in general. I was going to look into some BRIC ETFs (not necessarily because I wanted to invest myself, but Netbug was asking me about emerging markets), and I have to say the lax regulation/fraud risk issue is enough for me to not bother. Besides, the Canadian market is plenty levered to the Chinese growth story anyway.

You may recall reading (and if you don’t live in London, laughing) about our woes with record snowfalls here in London this year. The snow squalls were bizarre in their specificity, these narrow finger-like bands of cloud streaming off Lake Huron, arrows shooting straight for London. Towns just 30 minutes away to either side still had green lawns in some cases. I just realized now that I may have caused this series of supernatural storms via the application of accidental weather witchcraft.

You see, just before this all started, I was starting to decorate the office for winter (read: procrastinating on my thesis) by cutting out paper snowflakes from scrap paper (and I have a lot of scrap paper on my desk). I then hung them around the office at important power nodes, including a large tissue-paper snowflake guarding my filing cabinet. Perhaps summoning the most power weather magick was a string of snowflakes, of all different sizes, with at least one cut out by other members of the office, that was then itself hung from snowflake garland. This multiplicative effect of snowflake on snowflake, combined with suspension from the ceiling in the psychic centre of the room may ultimately have been too much for the physical realm to bear, and snow squall after snow squall was summoned up and directed directly at London until finally well over a meter of snow blanketed the supernatural signal and it’s dread message could no longer be received in the humid airs above Lake Huron.

To all the residents of London, I’m deeply sorry for this irresponsible — though accidental — use of the dark arts, and I promise it will never happen again.

I was having an interesting discussion with Netbug earlier about net neutrality and bandwidth caps and the like. He also recently sent me to a standup bit by Joe Rogan:

“If I left you alone in the forest with a hatchet, how long before you can send me an email?”

It’s a funny, poignant point that much of what we use in our everyday lives is basically magic to us. Infrastructure is very important, we basically can’t do anything without the network of tools and facilities around us. But infrastructure covers a lot of things, certainly more than roads and sewers and electricity which may be what first comes to mind with the word.

At some point in the future, perhaps the ability to download large files will be seen as an important infrastructure for a country to have. Without that in place, innovation can get stifled. Maybe soon the government may wake up to the anti-competitive behaviour of the ISPs and the data caps, how it’s crippling the infrastructure, and start to regulate them like the duopoly utility they are. Maybe split the companies up so that the infrastructure company is separate from the content distribution/media company.

An interesting idea to be sure. I don’t think it’ll happen in the near future: the current government seems to have no stomach for smacking down the ISPs or touching net neutrality, but if it’s recognized that these policies are holding back whole sectors of the economy, it may be an issue in the future…