Archive for August, 2005

Home Ownership Costs

August 7, 2005

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A column (BugMeNot) in today’s The Toronto Star warns against underestimating the costs involved in owning a home. Costs involved in home ownership include (in addition to the mortgage):

  • Property taxes
  • Initial expenses like furniture, lawn tools etc.
  • Home Maintenance and Repairs
  • Higher home insurance
  • Heating
  • Electricity
  • Water and Sewer

Déjà vu

August 5, 2005

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The IPO of “Chinese Google” Baidu.com is reminiscent of the glory days of 1999. MarketWatch.com reports that the stock, which was priced at $27, opened at $66 and closed the day at $122, a single-day gain of more than 350%. As can be expected, there are plenty of cheerleaders like this columnist, who writes that “Baidu’s charts show a rocket-ship trajectory that many investors want to hitch their wagons to” and points to estimates that search-advertising in China is expected to quadruple to $690 million by 2007.

A reality check: At its offer price, Baidu.com was valued at 42 times its net revenue for the previous year. At the day’s closing price, Baidu.com trades at 190 times revenues. Such nosebleed valuations leave no room for error. Long-term investors will stay away from this stock, considering the long list of risks associated with a small .com operating in a far-away market.

CIBC’s Enron Mess

August 4, 2005

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Canadian Imperial Bank of Commerce struck an enormous US$2.4 billion settlement with Enron investors, mere days after the retirement of outgoing CEO John Hunkin. To put that in perspective, the bank earned C$2.1 billion for the entire financial year 2004.

Mr. Hunkin, it should be pointed out, earned a total direct compensation of $9 million during CIBC’s previous financial year partly due to “producing the best total shareholder return performance among Canadian banks over the 2004 fiscal year, over four of the last five fiscal years, and over the five-year period ended October 31, 2004”. Predictably, investors in the bank are left holding the bag. They are, rightly, demanding that Mr. Hunkin bear more than token reponsibility for the debacle that occured under his watch.