Outstanding Financial Pornography

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor.

Outstanding Financial Pornography

Postby Norbert Schlenker » 07 Mar 2005 14:06

From TheStreet.com today:
Jim Cramer wrote:I am kicking off with it not just because this is the anniversary of the Nasdaq peak, but because rules like that one -- simple, nonquant and yes, nonfinancial rules -- saved me five years ago.

These days there's plenty of revisionist history on the part of financial commentators ...

Like this guy?

The Winners of the New World

Outstanding Accomplishment Awards
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Postby scomac » 07 Mar 2005 14:51

An apt title for this thread, Norbert. As I read through the various linked articles, I couldn't help but think of that notorious southern con; the Flim Flam Man. :twisted:

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Postby runningman » 13 Mar 2005 20:38

Here's some financial porn.
This article is disingenuous. The index would track the overall market weights with no heed to the markets valuation. It seems a market timers article to throw mud at indexing.

http://www.thestreet.com/pf/funds/jondmarkman/10212638.html
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Postby Max » 20 Mar 2005 15:59

Norbert, I mentioned this e-mail I have from Canstock about Al budai being the "Warren Buffet of Canada"

It may be important enough from an awareness point of view to post it.

It's a couple of pages.

Would that be okay?? I know you don't like long quotes but this one is priceless.

Thank, Max
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Postby Norbert Schlenker » 20 Mar 2005 16:53

Go for it, Max.
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Postby Max » 20 Mar 2005 17:43

His website

http://www.canstock.com/

Here's the e-mail:

“Warren Buffett of Canada” To Enter Into Joint Venture & Acquire Stake in DiscFactories (DSK:TSX-V)

This e-mail represents an effort on the part of our organization to make you aware of the planned expansion in the publishing activities of Al Budai who has been labeled by the media (i.e. CBC Radio) and investors as the “Warren Buffett of Canada”. He is currently one of the leaders in the 2005 edition of the annual stock-picking contest put on by The Globe & Mail newspaper.

Mr. Budai will be the driving force behind a joint venture that is being established between his private company, Tumbleweed Publishing Corp., and DiscFactories Corp., a public company trading on the TSX Venture Exchange under the symbol DSK. DiscFactories stock, which has recently been trading in a narrow range of 11-14 cents, closed at 13.5 cents on Friday, March 18, 2005.

The joint venture will publish personal finance, investment, tax and business opportunity newsletters, as well as a business start-up kit.

At the present time, there are few competitors in the financial newsletter publishing sector in Canada. Lombardi Publishing Corp., a wholly-owned subsidiary of Toronto-based Lombardi Media Corp., is currently the leading financial newsletter publisher in the country. Lombardi Publishing produces a wide variety of newsletters, books and home-study courses covering financial, health and business opportunity issues. The newsletters are typically no more than eight pages in length, published monthly and range in price from $40 to $1,500 per year. The bulk of the company’s sales are derived from the newsletters that are delivered either in print or online. The newsletters are marketed primarily through direct mail campaigns. Lombardi Media has generated tremendous growth in revenues and profits over the course of the last five years. The company, which reported revenues of approximately $9.9 million and net earnings of $0.3 million or 3 cents per share for the year ended January 31, 2000, posted sales of $25.4 million and profits of $1.2 million or 12 cents per share for fiscal 2004. Lombardi Media’s consistent financial performance leaves little doubt that the business of newsletter publishing can be highly lucrative. The high gross margins and economies of scale in printing and publishing newsletters, books and home-study courses clearly enhances the likelihood that the company will continue to report revenue and earnings per share growth. Not surprisingly, Lombardi Media recently announced record revenues of about $24.0 million and net earnings of $1.36 million or 13 cents per share for the 9 months ended October 31, 2004. In the comparative nine month period in the previous fiscal year, the company posted revenues of $19.4 million and net earnings of $1.18 million or 12 cents per share.

Will the joint venture between Mr. Budai and DiscFactories be as successful as Lombardi ? Of course, time will tell, but in the words of one investor “I wouldn’t bet against Budai as he has an exceptional track record for picking stocks and building businesses “.

Reproduced below in its entirety is the news release issued by DiscFactories on March 1, 2005, announcing the joint venture …

DISCFACTORIES SIGNS LETTER OF INTENT WITH TUMBLEWEED PUBLISHING CORP.

DiscFactories Corp. has entered into a letter of intent with Tumbleweed Publishing Corp. to create a joint venture, as originally announced in Stockwatch on Dec. 21, 2004. The joint venture will be formed through a limited partnership, which will operate as a new publishing division of DiscFactories under the name "Twin Rivers Media," and will publish personal finance, investment, tax and business opportunity newsletters, as well as a business start-up kit. DiscFactories and Tumbleweed shall each have a 50-per-cent interest in Twin Rivers Media. The terms of the joint venture will include an option for DiscFactories to acquire Tumbleweed Publishing Corp.'s 50-per-cent interest in the joint venture for fair market value consideration at a later date.

Tumbleweed shall be operator of the joint venture in Kamloops, B.C., and will contribute all right, title and interest in and to all of the content developed by it to date, inclusive of all intellectual property. DiscFactories will move its robotic production equipment to the joint venture's headquarters in Kamloops for use by Twin Rivers. Tumbleweed will be responsible for the further development and commercialization of Twin Rivers' products and services, and will exercise control over the day-to-day operations.

The company has agreed to advance $250,000 to Twin Rivers in the form of a loan, which will be provided at arm's-length terms at commercial credit rates, and which shall be repaid in full on or before March 1, 2007. In connection therewith, the company will be proceeding with a non-brokered private placement with SIS Investments Inc. for gross proceeds of approximately $250,000, as previously announced. The company will issue approximately five million units at a price of five cents per unit, each unit consisting of one common share and one share purchase warrant. Each warrant will be exercisable for an additional common share for a two-year period at 10 cents per share. The common shares and any shares issued on exercise of the warrants will be subject to a four-month hold period.

Tumbleweed Publishing Corp. is a private British Columbia company controlled by Albert S. Budai, an insider of the company, through his control of SIS Investments Inc., which owns more than 10 per cent of the issued and outstanding shares of the company.

Tumbleweed Publishing was established originally as a proprietorship over two years ago to commercialize various publishing properties and has built an extensive library of articles and content that will form the basis for the new service. The following titles have been under development by Tumbleweed Publishing over the course of the last two years:

Canadian Income Investor;
Net Profit;
Dollars & Cents;
Real Estate Reporter; and
Canadian Tax Saver.
The joint venture and the financing are subject to the negotiation of definitive transaction documents, and all required regulatory and stock exchange approvals. The joint venture and the financing will also constitute related party transactions because of the common control of Tumbleweed Publishing Corp. and SIS Investments Inc. The company intends to rely on certain exemptions from the related party transaction requirements under applicable regulatory requirements in completing the transactions.

The company is also increasing a debt settlement transaction originally announced on Dec. 24, 2004, from $50,000 to $91,970, at 10 cents per share.

The company has granted incentive stock options to a consultant to purchase 50,000 common shares in the capital of the company at 10 cents per share, pursuant to the company's stock option plan.

An extensive marketing campaign to make the general Canadian investing public aware of the joint venture is expected to commence in the final week of March 2005.

Thank you for your past, present and future support.

Best Regards,

Donna Bourgeault

Circulation Manager

CanStock Information Services Corp.

Suite 35, 750 Fortune Drive

Kamloops, B.C. V2B 2L2

phone: (250) 554 - 3101

fax: (250) 554 - 1120
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Postby Norbert Schlenker » 20 Mar 2005 18:22

Max, that's not financial pornography. It's just a weird series of transactions.

By all indications, Budai owns SIS. SIS is going to pay $250k to DiscFactories for a bunch of shares, and DiscFactories is going to turn around and lend the money to Twin Rivers. Meanwhile, if you look around at SEDAR, you will find notices of intent to sell large fractions of current DiscFactories shareholdings by both SIS (i.e. Budai) and the current CEO as well.

Budai's purpose in this circular transaction is unclear. If he can unload current shareholdings for cash in his pocket (see this), shift $250k from SIS's coffers to Twin Rivers but maintains operational control of Twin Rivers, i.e. the $250k is still under his thumb, then I suppose he's no worse off. Budai/SIS end up with extra shares of a public company, i.e. more control, and the public company ends up with a half share of a joint venture whose only verifiable asset is a loaned $250k, which they are counting on Budai himself to look after.

My head's spinning. How about yours?

P.S. I note also this sentence from the press release: "DiscFactories will move its robotic production equipment to the joint venture's headquarters in Kamloops for use by Twin Rivers." That certainly sounds impressive. Until you look at DF's audited financials, which show the book value of production equipment to be a whole $12,199. That's not thousands of dollars either. It's twelve grand. Since Budai's contribution to the joint venture is his intellectual property, and he's going to end up with a 50% stake (ignoring the loan now), I figure that makes the IP worth about twelve grand too. I'm a little underwhelmed.
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Postby Norbert Schlenker » 22 Mar 2005 11:37

Here's an example of poor financial pornography. I don't know how you could fit more irrelevant information into 1000 words than this.
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Postby jacko » 22 Mar 2005 12:06

Deleted.
Last edited by jacko on 25 Apr 2005 20:46, edited 1 time in total.
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Postby Shakespeare » 24 Mar 2005 19:14

“Never appeal to a man's better nature. He may not have one. Invoking his self-interest gives you more leverage.” -- R.A. Heinlein, Time Enough for Love.
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Postby Bylo Selhi » 24 Mar 2005 19:56

Shakespeare wrote:WSW Cancelled

The W$W-in-exile got cancelled last year http://www.washingtonpost.com/wp-dyn/ar ... 4Oct8.html

Meanwhile the porno-legacy keeps going and going...
Image

At least the replacement honey money bunny is cuter than Uncle Lou
Image
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Postby scomac » 06 May 2005 15:32

The latest from the desk of Gordon Pape. Is Pape becoming the poster boy for financial porn? It's becoming more and more apparent who's buttering his bread.

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Postby Bylo Selhi » 06 May 2005 16:12

Just one snippet from Pape [with my emphasis]
“Buy and hold strategies and indexing will probably deliver sub-par returns,” he and his associates write.
Not just "probably" but certainly if "par" means the market as a whole. Doh!

“In contrast, astute stock picking and concentrating the number of stocks held in portfolios should provide the best opportunity to enhance returns in future years.”
Yup. Just as in a casino, "astute" playing "should" provide the best "opportunity" to leave with more money than you brought in. Of course that's hardly a guarantee that you will, no matter how "astute" you may be at playing cards or throwing dice, etc.
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why the real estate boom is here to stay..

Postby unicef01 » 14 May 2005 19:43

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Postby Bylo Selhi » 16 May 2005 09:24

More Folk "wisdom": Real return bond funds seen as an inflation hedge
TD Real Return Bond Fund is more than an insurance policy on inflation. Category-leading performance over the past decade -- a period described by low and stable inflation -- supports this notion. Manager Satish Rai created this unique bond fund to capitalize on a secular decline in bond yields, and with bond yields at long-term lows, capital insurance will move to the forefront of reasons for owning this fund...

While not directly dealing with the dangers of using past performance in fund selection, the piece goes on to quote the manager, "I think the days of creating wealth out of bond funds are mostly behind us. If you're looking to make a 7, 8, 9, 10% return, I think you're going to have to go up the risk curve to get that." but completely fails to point out that the fund's MER of 1.6% will gobble up 1/3 or more of those modest future returns :(
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Postby Norbert Schlenker » 16 May 2005 12:43

there are more gains to be had according to Rai: "As long as the federal government's debt-to-GDP keeps coming down over the next five years, and that means they basically maintain a balanced budget, the expectations would be that the real cost of borrowing would keep dropping a little bit."

That ain't my expectation.

But the most pornographic line in the whole piece is this:

"It's an insurance policy that doesn't cost any money," says Rai, pointing to the lack of cost premium on these bonds for the inflation hedge.
:roll:
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Postby scomac » 16 May 2005 14:37

Bylo Selhi wrote:the fund's MER of 1.6% will gobble up 1/3 or more of those modest future returns :(


Yup, in fact all of the yield in excess of inflation. IMO, that makes TD's RRB bond fund currently the return equivalent of cash with the risk equivalent of a long bond. :x

I've attempted to point this out to some other folks on several occaisions, yet they continue to be seduced by the superior historical RoR (to nominal bonds). :?
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Postby Shakespeare » 16 May 2005 16:43

Folk "wisdom"

Folklore? :wink:

Sorta like Pape-al Bull.....
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Postby Bylo Selhi » 16 May 2005 16:52

Shakespeare wrote:
Folk "wisdom"

Folklore? :wink:


Folk U! :twisted: :lol:
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Postby Friendly Dragon » 16 May 2005 19:48

the fund's MER of 1.6%


Yiikes! :shock: that's pretty steep for a bond fund.

Notice how the more exotic an investment product is, the more expensive it is?
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Postby yielder » 23 May 2005 08:06

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Postby scomac » 23 May 2005 10:32

Yielder wrote:Jeremy, what's next? The behavioural problems of stock picking?


Ya think? :wink:

Sounds like a master plan to publish a new book every 10 years discrediting the thesis of the previous work. Ya have to admit....it would make for a pretty nice perpetual income stream from book royalties. :roll:
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Postby Norbert Schlenker » 04 Jul 2005 13:57

Carrick in last Saturday's G&M

The worldly thing to do with your retirement savings plan right now is to forget about the world.

Instead, go Canada. At a time of increasing global uncertainty over slowing economic growth and soaring oil prices, our home and native land stands out as a good place to invest.

The most basic rules of investing say you should diversify your holdings, which means mixing global stocks and bonds with your Canadian holdings. But that doesn't mean we can't engage in a little dialogue about the benefits of investing at home, especially given that it's the Canada Day long weekend. Debating the investing merits of Canada is all the more timely because the 30-per-cent foreign content limit for registered retirement savings plans died this week when the federal budget was given royal assent.

The most common reason for investing abroad is that Canada represents only 3 per cent or so of the global stock market. But that's like saying you should avoid too much filet mignon because it's just 3 per cent of the cow.

Today, Canada is investing filet mignon. Here are three reasons why you should eat up. ...
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Postby beaverlodge » 05 Jul 2005 10:51

Growth Investing
Value Investing
Science and Technology Investing
Indexing
Buy and Hold
Foreign Investing
Income Trusts
Bonds
Currency

Interesting, or depressing, how well informed investors, fund managers and fund companies can be on the right or wrong side of any of the above.

And how important and how seldom most get it right.

And a lot more has been left out - small cap, med cap, large cap, etc
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Postby Norbert Schlenker » 18 Aug 2005 15:20

Have a gander at this.
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