Morning Call [7:16am ET] A tale of two receptions: the story of how life is changing so quickly in the world of finance and capital markets. Last evening I attended the reception at the Royal York Hotel of Teck Corp (TCK), a major sponsor of the PDAC mining convention in Toronto. I had just come over from the Metro Convention Centre where China Inc held a similar party. Well, not quite!
Of the approximately 25,000 attending this year’s PDAC, I’d guess there were some 300 attending in the Teck room versus about 1000 for China. For food and beverage, I’d rate China’s a 7 on a scale of ten versus 4 for Teck. But the reason to go to these affairs is to meet people, and the China meeting showed the big difference, where I gave it a rating of 8 versus a 1 for Teck.
The vibe was definitely happening with China. In fact I couldn’t walk more than ten steps without meeting a very senior deal-maker or senior executive. Deals were being pushed left, right and center. Ten cent stock, fifteen, twenty-five… private companies about to go public… insiders asking associates they’ve known for years – but may not have seen for a couple years – in from Switzerland, Beijing, London, Vancouver, South Africa… chance meetings really… here, take a couple hundred thousand of this deal or that one… I’ll close the offering next week… and on and on, person to person, as I walked around the room.
If you can’t get up for situations like this, you are not breathing. You can smell the money. It’s all about the deal, and it’s definitely happening with China.
Spent some time chatting with Rui Feng, Chairman and CEO of Silvercorp Metals (SVM.TO), the biggest silver producer in China. He told his associates that he was so thankful I had written an article in the early days about his company. He has a lot of stock in SVM, and is personally worth hundreds of millions. I alerted people to his deal at about C$0.15 (post-split),, and it’s now about C$7.00.
Fortunes are made in the mining business, and I have seen hundreds. What I am seeing now is that China is spreading their contacts out around the world. They have the money, have been acquiring the required expertise, and now finding the deals. These properties may be located anywhere in the world and the only strategic aspect to their interest is their basic interest in making money.
Julie Zhu, conference manager for the China Mining group of Sino-Confex International, put on last evening’s reception. If you want to do some homework, contact her at Julie-zhu@sino-confex.com.
At lunch earlier in the day, John McCluskey, Alamos Gold Chairman & CEO said the same thing as Rui Feng, that I had first alerted people to the Alamos (AGI.TO) at C$3.00 and it’s now close to C$14.00.
After lunch, I made a presentation to the five senior officers of the Horizons Exchange Traded Funds group. I think it went well, although they moved the schedule up from the earlier arranged time on Friday in order that I could meet all the team.
As to markets this morning, the $US Dollar is strong, precious metals are retreating, oil down even more and equity futures are showing a tough day ahead for the Bulls.
Have a good day.
CTA Trading Desk Post-Close Report
Excited by continued strength in the people’s favorite Apple Computer (AAPL+1.86%), a microscopic opening dip enticed buyers back into the market sending the popular averages higher in early afternoon trade. As prices neared the January high of 1150 in the S&P, mild profit-taking sent equities a bit lower into the close. Trading volume remaining muted and prices still trading in a narrow band (S&P +0.17%).
We have talked about looking for a trend change during the month of March, important turns often occurring during this time period. With the Russell 2000 now up 19 out of the past 21 days (IWM), this advance is beginning to feel a little like the March 2000 high-tech blow-off top.
“For every action there is an equal and opposite reaction” -- a phrase attributed to Sir Isaac Newton -- will at some point be relevant to the current trading environment. Prices are very stretched on a short-term basis, but successful traders know to wait for price action confirmation before aggressively betting against the prevailing trend.
The prevailing trend is up; the yearly chart is pointed higher, as are the monthly and weekly charts. This doesn’t mean traders should be pressing the long side, as they probably should begin scaling out of positions into strength. Shorting is a very risky venture until a series of lower highs and lower lows is recorded on the daily charts.
If S&P 1150 is taken out, higher targets are 1170 and then 1128; weakness below 1125 to 1130 raising caution flags. With one measure of complacency sounding alarms (VIX +0.13%) and upside volume unimpressive as we approach a potential double top, there are plenty of reasons to feel the market is topping.
But as we have repeatedly stressed, the market is not a sane beast, doesn’t give a hoot about what you think -- no matter how intellectually sound your ideas are. )Price action alone will tell you when supply has overwhelmed demand.
Patience traders; patience!
Have a great evening.
Comments
Cara 100 Update
TXN - PT Raised from $26 to $27 @ Kaufman Bros. Hold
Loannetter,
In regards to the farm contractor (s), I did not ask if, they knew, the location as to where the production was going. Just that prices are going up, especially in cotton.. Baz
Bills ' Morning Call ' is exactly the ' long term ' investing
possibilities that still have relevance in todays ' Wild West ' markets..
Cara 100 Update
AAPL - PT Raised from $264 to $280 @ Broadpoint. Buy
AET - Upgraded to Neutral @ Bank of of America/Merrill and takes its price target up $4 to $36.
For the little guy?
Bill, thanks for the updates.
For the little guys out here, who know that roughly 1 in 100 small caps (not sure if that is mining small caps, or across the board) actually make it ...how to get involved? There is obviously an importance to being there - in the know - and meeting the people, and hearing the opinions. From other industries I know that until you meet the people, and hear 360 degree opinions you don't really really get a company on an intuitive level, and therefore can't evaluate it.
Any chance for the little guy to invest in this space without going to trade shows (and even then it's like an outsider going to get a salespitch versus having friends on the inside)...
NatGas linked companies?
Does anyone here track any companies that are linked to use of the natural gas but not involved in gas production (ie transformation of vehicles, infrastructure)...if so let me know!
Re: Loannetter,
baz22 -
Cotton going up?
http://shockedinvestor.blogspot.com/2010/03/curren...
Re: NatGas linked companies?
Navid,
You could look at the MLP sector for a natgas infrastructure play. KMP, LINE, NRGP, ETP, MWE. They pay a nice dividend.
Cara 100 Update (Final)
ADBE - price target boosted at Citi to $42 from $39 on strong February quarter results, and improved visibility. 2010 and 2011 EPS estimate set at $1.84 and $2.14, respectively. Reiterate Buy rating.
BBY - estimates, target cut at Government Sachs. Shares of BBY now seen reaching $44. Estimates also reduced, because of lower expected margins. Neutral rating.
TXN - numbers boosted at FBR. Shares of TXN now seen reaching $34. Estimates also increased, to match the company's new guidance for higher demand. Outperform rating.
Re: NatGas linked companies?
Chemical companies like DOW are huge users of nat gas. I have not followed them lately, but at times they would trade inverse to the commodity price. Much like airlines to oil.
Bob
PDAC part 1
spent some time yesterday getting a feel for the PDAC
busy as usual, the booths seem to be generally the same.
for some reason it appears that more women and more young people are out and about. perhaps the face of mining really is changing.
some companies crossed my radar that i was surprised i hadnt come across before.
glad to hear Bill is looking at Amerigo (ARG.to), this was a holding i was uncomfortable with after the earth quakes in chile but the share price held up reasonably well. i recently added to my holdings for diclosure purposes, and im interested in what brought Bill to their booth. copper investments to me are even riskier than gold because its a metal im not as familiar with. but either way.
Miranda gold (MAD.v) .... my long lost love... i dont know what to say that hasnt already been said.
i noticed some banners sponsored by a mid-cap miner which will remain nameless, i dont want a law suit on my hands but for those in attendance youll know which one im referring too. my experience is that mid-caps sponsoring banners are trouble. their money should be spent on exploration and limit their name to properly worded press releases to keep shareholders in the loop, not on banners, commericals and swag at the PDAC.
more to come in part deux!!
China Small Cap / OTC BB Stocks
Hey everyone - hope you're having a good week so far. I mentioned over the weekend that I'm doing some digging up on China small caps that play into the growth over there in resource consumption and consumer spending.
Here is a list of a few companies that I'm looking at taking positions in:
SOKF.ob > They own a chain of health clubs and spas > growth is tremendous. They did $0.17 in earnings last quarter and are growing revenues over 60% and earnings over 80%. This is a direct play on a growing middle class that has more disposable income. China has emphasized relying more on internal growth and this plays right into this theme. The stock is trading at about 6 times annualized earnings, which are growing at least 50%.
NEWN.ob > They make lithium ion batteries and are also growing very rapidly. They announced two acquisitions within their own space to improve margins and gain access to international customers. Valuation looks cheap.
CNET > just uplisted...still researching this one.
CELM > on my watch list...will continue researching it.
Those are the ones I found most intriguing from a valuation perspective, particularly the first two. NEWN has a lot of competition but it still looks quite cheap. I really like SOKF, both in terms of it's concept / investment theme and valuation.
If you have any insight on these let me know.
A tale of two JURISDICTIONS
Joey got wind of a lunch/presentation hosted by a more-northerly-than-northern territory, with an storied but until recently lapsed history in mining.
We were whisked into a well-appointed private dining room and immediately offered a drink. Soon after taking a seat at a well-laid round table, an excellent salad appeared, and a series of terse 5-minute speeches began: the territorial mining minister, the economics development dept - both touching on specifics moves taken to streamline their permitting process. Next, as a succulent main course appeared, several juniors active in the territory gave 5 minute summaries of their work, and how the local gov't had speeded their progress (In one case passing a new law within 10 days of the surfacing of a problem).
By contrast, that evening I attended a formal reception hosted by Southern-most-major-nation, wherein attendees were packed into rows of chairs facing a dais, and subjected to long-winded speeches from several levels of gov't official and big-company spokesmen. The bartenders were embargoed from offering drinks (we entered well into cocktail hour) until the last speech was over: 90 minutes in total. The (unintended?) message was: formality and bureaucracy are alive and well down here. Major new projects have taken YEARS to permit, and negotiations over them never really end. Universities and NGO's participate in this "dialogue" When you come to OUR cocktail reception, you won't get a DRINK till well into dinner time!
But we promise that we are DETERMINED to increase the amount of investment we attract and the exports of minerals from our country.
Translation: We have no clue that competing jurisdictions are making us seem a caricature of ourselves.
Reminder: downloads available on the home page
Top of the right-hand column of the Cara Community home page:
-- You can request a Cara 100 Model Portfolio ETF prospectus.
-- The GS "Crossing the Rubicon" report is still available.
-- New. A slideshow featuring 45 Lessons in Life.
Jack
Speaking of Chile
I was there last week. I can say from first hand experience Santiago has held up admirably well. It's a very together country.
I've been looking over LAN (LFL) and I have to say I like their results. Historical growth is terrific and the recent earthquake only made a small divot in their price. Their response to this crisis impressed me immensely. They had an improvised headquarters set up on the tarmac outside Santiago airport and are providing an admirable amount of service even now.
http://www.lan.com/about_us/noticias/index_conting...
I can say my personal experience was extremely good, considering their headquarters were essentially destroyed. Their customer service was excellent throughout my (accidental) extended stay in lima from the first to the third and I'd definitely recommend them as an airline to anyone traveling to South America.
Relations page here, dyodd
http://www.lan.com/about_us/info_inversionistas/in...
Edit: no position, waiting on a confident close over 18 and clearer rsi/stochastics.
gold asset allocation 1970s
For long time I looked for info in gold/PM allocation in late 1970' vs now. The best info I found was here but dated (2006): http://www.usagold.com/gildedopinion/richardson.html
Anyone has a better source? Or remembers that stuff personally?
I think monitoring gold/PM allocation is a good road map in this "ultimate bubble."
BTW, the above page has a chart that is hinting peak gold production. The GS report seems to confirm that as gold supply seems to be as resource restricted as oil. One of the GS charts showed only 25 year reserves in both oil and gold.
This chart is from 2007 but shows that gold price rise is in part due to declining production: http://upload.wikimedia.org/wikipedia/commons/a/aa...
How come no one talks about peak gold?
Edit: some people do talk about it on surprise... http://www.theoildrum.com/node/5960
SOKF.ob
Here is an investor presentation on SOKF I found on sec.gov:
http://www.sec.gov/Archives/edgar/data/1355835/000...
Dividend Stocks
I'm interested in stocks that pay a decent dividend. Right now I'm holding ARLP which pays about 7% and KMP (6.6%).
Does anybody have a solid stock that pays consistently at least 6%?
Mining Education Resources
I'm hoping that some community members can offer education resources geared towards mining, exploration and valuation methods. After spending time at the PDAC site and listening to some webcasts from the recent BMO conferences .... I'd like to learn more.
http://audability.com/AudabilityAdmin/Clients/BMO/...
Re: SOKF.ob
Bought an opening stake in SOKF at $4.20 as a play on the growing disposable income in China. It's tough to place a limit order on this one because it isn't that liquid. Liquidity has been increasing over the past couple of months, though, as I suspect more people are looking at opportunities for growth in the Chinese economy.
Re: Dividend Stocks
Try http://quantumonline.com You have to register, but it is free. They have several lists of dividend paying stocks. Some of the MLP's (master limited partnerships) pay in the 10-12% range.
Re: Dividend Stocks
Look at VZ,LINE, FGP for stocks. Need to research at company site. Yahoo, Google et al dividend info is outdated
Re: Mining Education Resources
if only someone had said this to me 5 years ago:
most mining mutual funds that are packed with CFA's that specialize in commodity valuation methods cant seem to be their parent index on any consistent basis, therefore the sum total of the quantitative measures used by professionals amount to nothing more than panoply.
good luck.
its crap stock day!
Well, first Citibank (+7%) and now AIG going vertical - presumably on some sort of news (+7.5%) at 13:00 ET.
Re: Mining Education Resources
so then your advice here is to perform fundamentals research on companies one is interested in and watch their price performance relative to parent index instead?
Don't mean to come off as hostile. Working on learning myself.
Re: Mining Education Resources
look up what panoply means and rethink your question lucky ;)
Re: Mining Education Resources
heh just did, before I asked the question (a suit of armor or a showy display). Let me see if I can rephrase it. What then is a good metric for mining/materials? Calling company analysts?
Re: its crap stock day!
Not sure if related, but my sentiment charts are showing very bearish positions across most traders in equities in the last several days. I guess everyone is shorting the "double top." The truth is we will see a major short squeeze shortly.
Re: its crap stock day!
09 Mar 2010 13:49 [AIG] Hearing vague speculation that short selling rules could restrict activity in C, FNM, FRE, and AIG
dupe
sorry
Re: Dividend Stocks
Here's one I own.
Energy Transfer Partners (ETP)@ 7.58%
Re: Mining Education Resources
"What then is a good metric for mining/materials? Calling company analysts?"
if a mining analyst using all his tools of the trade is unable to make you more money than a passive index, then would a mining analyst help you make more money than simply investing in the GDX or GDXJ?
Re: SOKF.ob
Interesting little company. I don't know much about that market (or any other for that matter) in China but it sounds like they have a good business model. I too noted it has been pretty thinly traded in the past. Do you plan to accumulate for a longer-term hold?
MPEL was a nice ride - shed some of it today, but holding the rest.
Re: Mining Education Resources
ah, point taken. Thank you very much for your thoughts. I'm not terribly interested in mining anyway so I suppose if I want exposure to it I'll just try GDX or GDXJ.
Re: SOKF.ob
Yeah I'm going to hold it longer term and will buy in thirds. On paper it looks really cheap. They will probably have to do an equity offering at some point to continue their location expansion. If the stock sells off on that news I'll buy more.
Re: Mining Education Resources
Really ... I had higher expectations here. Maybe a book or something?
CSCO news on new internet backbone routers
Cisco Unveils Faster Internet Router
http://bit.ly/bmSLL4
You know the drill on getting the full article.
"Cisco boasts the new router has enough capacity to allow every book in the Library of Congress to be downloaded in just over a second, or to stream every movie ever created in less than four minutes. But those measurements are for data passing through the core of the Internet, and consumers shouldn't expect to experience that kind of speed, even on a network fully-equipped with the new Cisco gear.
The limiting factor preventing higher-speed Internet access to individuals is the so-called last mile connection between homes and the rest of the Internet. Most people in the U.S. only have access to connections that max out at 10 megabits per second—a transmission rate that is well served by current network equipment.
Efforts to improve these speeds have gained stream recently, however. The Federal Communications Commission is expected next week to unveil a plan that calls for increasing the rate at which Americans connect to the Internet. And Google Inc. recently said that it will provide Internet connections at a rate of 1 gigabit per second for 50,000 to 500,000 people—which is about 100 times faster than the current speeds—as a proof of concept for ultrahigh-speed networks."
Would you consider this to be a bullish looking chart?
looks like a pretty consistent channel...
Re: Mining Education Resources
ALOHA !!
Worth a read ...
THE MINING VALUATION HANDBOOK
By Dr. Victor Rudenno
I have the 2nd Edition, Australian mining and energy valuation for investors and management. I bought it at the University Of Western Australia bookstore in Perth, so I am not sure who sells it here in America. Check Amazon ...
Lithium
For you lithium lovers out there:
www.nytimes.com/2010/03/10/business/energy-environ...
Seems that POT is in the game.
Re: Mining Education Resources
Try Edumine, I recommended it before. Most of the courses are for mining folks but they do have several online course pertaining to investing in mining companies.
http://www.edumine.com/xedumine/selectacourse.asp
Edit:
Courses in Management - Risk - Financial:
An Introduction to Evaluation of Junior Mining Companies for Investment Purposes
An Introduction to Mining Investment - Understanding the Risks
An Introduction to Modelling Coal Project Finance
An Introduction to Modelling Metal Project Finance
Economic Evaluation and Optimization of Mineral Projects
Engineering for Success in Mining
Estimating the Cost of Mining
Interpreting the Financial Statements of a Mining Company
Managerial Accounting in Mining
Mine Project Economics
Mineral Project Management (a CIM Course)
Mineral Property Valuation 1 - Standards and Guidelines
Mineral Property Valuation 2 - Approaches and Methods
Multiple Accounts Analysis
Practical Tools for Sustainable Relationships in Mining
Risk and Decision Making
TQM For The Mineral Industry (A CIM Course)
Re: Lithium
Illini -
POT has a large interest in SQM (adr-nyse), the diversified Chilean lithium giant. I trade in and out of it. Earthquake did not damage its operations and only put a little dent in its share price. Quarterly and year-end results were disappointing and so I'm out for now but growth, diversity, global footprint, and excellent country stability (economically, politically, but not physically!) make it a good candidate.
http://www.sqm.com/aspx/en/Default.aspx
TAX FIXING
ALOHA !!
When governments get involved in markets it disrupts capital flows and increases mis-allocation of capital creating malinvestments. This has been going on since the times of Rome, when Senator Gracchus introduced the "Ever Normal Granary", whereby he proposed the government of Rome buy grain from farmers and sell it for half the cost farmers could sell for at the market. During the peak of this "intervention" Rome saw lines for grain 200,000 people long. One of the first government conceived "welfare lines", certainly not the last.
I am proposing the same is going on now with Obama and his "Ever Normal Taxanary". This is where crashing tax revenues are "fixed" with debt. To show you I will go back to FY2007. These numbers are for the latest US Treasury data based on March 5th for each fiscal year.
TOTAL TAX DEPOSITS(in BIL)
3/5/10 - $848.209
3/5/09 - $890.432
3/5/08 - $964.896
3/5/07 - $947.353
TOTAL TAX REFUNDS(in BIL)
3/5/10 - $226.043
3/5/09 - $179.277
3/5/08 - $155.973
3/5/07 - $134.043
TOTAL NET TAX REVENUES(in BIL)
3/5/10 - $622.17
3/5/09 - $711.15
3/5/08 - $808.92
3/5/07 - $813.31
You can see above there is not much change between FY 2007 and FY 2008 in net tax revenue, but from then on there is substantial reduction in tax revenues at the same time there is substantial increases in tax refunds(68% increase) to individuals and businesses. I believe the reason we are seeing such increases in tax refunds is due to mounting losses and the use of what the IRS calls a "loss carryback". A number of my farming brethren have filed "loss carrybacks" going back to five years, which allows you to carry losses back to years when you had gains, which gives you a much larger refund in the current tax year, like borrowing from past profits. Still a "loss carryback" puts a much higher fiscal burden on Treasury. If we were all having profitable years then nobody would be filing a "loss carryback". A ticking time bomb for the US Treasury tax revenues today. How long before a "loss carryback" becomes extinct? Tax law can change very rapidly, so don't wait.
How might a government steeped in "intervention" make up for these drastic tax revenue shortfalls while refunds are on the rise as well as "stimulate" the economy so that we citizenry are not all rioting in the streets like they are in Europe and other countries?
Being the reserve currency of this World the US Treasury has a unique opportunity to pile on substantially higher debt in order for the current two party political monopoly to retain power in hopes of weathering this crisis in one piece.
Let's look at TOTAL US DEBT ISSUES going back to 2007. You will notice a trend. Once again this is from the US Treasury based on a reporting date of March 5th for each fiscal year. These sums include both US Treasury "marketable debt", like US Treasuries, and "non-marketable debt", like Government Account Series.
TOTAL US DEBT ISSUED(in TRIL)
3/5/10 - $25.112
3/5/09 - $22.645
3/5/08 - $17.512
3/5/07 - $15.733
There has been a 60% increase in total debt issued from FY 2007 to FY 2010, four years, averaging 15% rise in debt issues per year. So if US Treasury debt issues and spending are rising around 15% annually then that would more explain why I keep seeing an average 11.2% rise in HMSA healthcare costs and a 13.1% rise in farm supply prices. Its not all deflation according to my checking account.
In the meantime during those same years there has been a 30% decline in "net" tax revenues. So the US Treasury is very busy "price fixing" tax revenues, or "tax fixing" using debt, which "debt" is nothing but a promise to "pay" by future generations of Americans. Its easy to mouse click "debt" and roll it over into infinity so long as buyers of that debt keep showing up at the auctions, but repaying that debt is no mouse click. Repayment involves pain no matter which tool the US Treasury decides to use, devaluation or out right massive cuts. So far the only thing missing from "stimulus" and all these solutions to fix the US economy are "jobs".
Re: TAX FIXING
How do these numbers compare to prior deep recessions (80-82, 74/5, 30's) in terms of year over year %'s?
Re: Would you consider this to be a bullish looking chart?
Looks pretty good to me. I finally revived my StockCharts membership and have been playing with some of the features. Atached is a 18 month chart with "Raff Regression" lines. Check it out.
KC
Re: Loannetter,
Hi Doc..... Yes, the RSI is getting on up there... My line of thinking is the nutrients need for growth, but especially pest control.. I did notice there was a 26 year low for the acreage planted ( in 2009 )... ( disclosure: I don't trade ETF's due to tax implications )... http://www.benzinga.com/trading-ideas/long-ideas/8...
Washington DC
Bill,
I was in DC last week talking to various elected officials with a bipartisan contingent from our community, both public and private interests. We were trying to build awareness for some infrastructure issues in our community.
One congressman we met with that is likely to be a Senator in November said: "in 2013 I expect the the government of this country to implode. There will not be any buyers of our treasury bonds as we are issuing so much debt that they have their fill."
I also sat in the gallery at the Senate and watched the Senate debate a medicare amendment for the health care bill. The quote I that has me stunned is: "when we are spending $2.3 trillion for health care, what's another $10 billion." It was pretty clear that neither the D nor R Senators anticipated anything close to a budget neutral impact from health care from what we heard.
These two things tell me that we are in for some tough times ahead.
I just wanted to share this with you and the bolg readers. I am a faithful reader but rarely share - my bad, I know. But this information straight from the mouthes of our elected officials seemed important enough to share here.
Many thanks!
Mark
Re: Dividend Stocks
Here's my contribution.....a telcom would you believe? I'm a holder of Manitoba Telecom (MBT.TO ) which has being paying a consistent quarterly dividend of 65 cents, $2.60($CDN)a year and company has assured investors that the dividend is secure for at least through 2010. At today's closing price of $ 32.93 that's a fairly safe 7.96%. Thing is you need to move, like tomorrow, if you hope to safely be a shareholder of record by Monday. The April 15 dividend is payable to shareholders of record next Monday, March 15th. If you miss it, take 65 cents off the ex-dividend trading price and put in an order for the next quarter's entitlement. If you are patient you may get it if or when it cycles back to $30-31. This is exactly what I did in February with several buys. DYODD, and check out their website. Good luck.
Re: Would you consider this to be a bullish looking chart?
I honestly don't know what I'm looking at with technical analysis. I'm more of a fundamental analysis person...But it looks good to me!
Interesting Notes on SOKF SEC filings
I'm reading through more of the SEC filings on SOKF.ob...interesting little company, but more than anything it shows you how much potential there is for consumer consumption to grow in the health and fitness sector. Here are some notes:
"Our internal statistics show that the members of our fitness centers spend more than $700 per year. We believe that the rapid expansion of urban middle class population and continuous economics growth in China will provide the fitness industry with sustainable growth for the foreseeable future.
The growth potential in our key markets in Harbin and Shenyang is substantial. According to the 2008 China Fitness Club Industry Report (“AASFP Report”) published by the Asian Academy for Sports and Fitness Professionals,, there were 2,770 fitness clubs in the 61 largest cities in China. According to the AASFP Report, Harbin has a population of about ten million, with 50,250 individuals currently being served in 43 fitness centers, resulting in a membership penetration rate (the proportion of the fitness club members to the local population) of 0.51%, which currently makes it the 18th largest fitness market in China. Shenyang has a population of about seven million, with 59,500 individuals currently being served in 47 fitness centers, resulting in a membership penetration rate of 0.84% and making it currently the 14th largest fitness market in China. We currently operate one fitness center in Harbin (with about 8,000 members) and two fitness centers in Shenyang (with an aggregate of about 5,000 members). Based on the statistics provided in the AASFP Report, in Harbin and Shenyang, SOKO’s are as of operation, SOKO currently has market shares (the number of its members in the respective city as a percentage of the total number of members in fitness clubs in such city) of approximately 16% and approximately 8%, respectively.
Although Harbin and Shenyang are deemed to be second tier cities, we see more opportunities for our company in these markets than in other cities in China as we experience less competition while the residents of Harbin and Shenyang experience similar growth of their personal wealth as the residents in first tier cities. With respect to the beauty and spa market, SOKO’s own extensive market research by its marketing department shows that in its primary market, Harbin, SOKO has a market share of approximately 25-30% of the overall market, with a market share of about 50% of high end spas. Even in the current global economic downturn we find that our business is robust and the spending habits of our members and clients are relative unaffected. However, if Chinese economic conditions start to show deterioration and the Chinese stimulation program fails to achieve its goal, we may see a slowdown in our business. In the short-term, we face the challenge of a pricing war with our competitors. Facing such challenges, SOKO will continue its current strategy of focusing on high-end customers by maintaining our quality of services and continuing to promote our brand name to maintain the loyalty of our members and clients. SOKO promotes the concept of total wellness, which seeks a balance of nutrition, exercises and way of living rather than just fitness. Currently, approximately 81% of the members of our fitness centers renew their memberships and approximately 84% of our beauty salon and spa clients return and book additional treatments.
Although the fitness and beauty markets are fast developing in China, such markets face certain challenges. In China, the markets for fitness clubs and beauty salons and spas are currently not segmented. While in the US different clubs position themselves based on their target group (such as marital status, gender, age, social status, pricing, etc.), in China currently most fitness clubs and beauty salons and spas only compete on pricing. We believe, however, that market segmentation similar to the segmentation in the US will be the future. The majority of customers of fitness clubs and beauty salons and spas in China are well educated middle class residents with substantial disposable income seeking to show their social status. As such they have developed certain tastes and various demands and focus on building a certain lifestyle. In order to succeed we therefore must analyze their demands carefully and position ourselves accordingly. As the market will become more and more segmented, to gain considerable return in such segmented market will become more difficult and will result in slower development for our brand.
As the market entry costs are relatively low and new fitness clubs can attract considerable customers by massive advertising before opening, we face competition from new competitors. However, the expectations of the customers are very high. Due to a lack of customer service, meeting the demands of the customers and lack of managerial skills, many customers become disappointed and choose to leave such new competitors. In order to maintain our member and client base and attract new customers, we always improve our services and engage in extensive market research to find out more about our member and client needs, demands and trends.
We see loyal members and clients as a long term investment, whose value is increasing over years. While many competitors may be willing to enter into a price war, we position our company as a high end fitness center and beauty salon and spa operator that will not enter into a price war as a decrease of membership fees and spa treatment fees for new customers would alienate our existing members and clients. We rather work on building our brand image and recognition as an operator of high end fitness centers and beauty salons and spas that offers outstanding services and facilities and fulfill our members' and clients' growing demands. Although SOKO’s membership fees and spa treatment fees are not cheap in the markets where we operate, one of our main focuses is improving member and client experience by constantly adding new facilities, equipment, courses and treatments. Surveys of our marketing department show that our members and clients appreciate our constant increase of more quality services.
The 2009-2012 Investment Analysis and Prospective Projection Report on China Beauty and Spa Market points out that “[i]n 2008, China’s beauty and spa industry was seeing high speed development with 23.8%, its total revenue reached RMB 320 billion, and its profit rises with 37.9%, which is the highest growth rate among all industries in China. National employee number in beauty and spa industry is approximately 11.2 million, which ranks number one in the industry. Until 2008, demand for beauty and spa products is beyond Japan and Korea and is on first place in Asia while is third place in the world after the United States and France. As population base is very big in China, demand for beauty and spa products is very big, too. Based on per capita demand, China beauty and spa industry has 15 to 18 times market space to develop and future market is very optimistic. Now China beauty and spa industry is becoming the fifth hottest market after real estate, automobile, computer and electronics, and tourism. As it has excellent industry development prospect and space, tremendous commercial opportunity has arisen.
For the fiscal year ended May 31, 2009, our beauty and spa operations accounted for approximately 76% of our revenue, fitness operations accounted for approximately 15% of our revenue and miscellaneous activities (including our beauty school) accounted for the remaining 9% of our revenue. For the first three months of fiscal year 2010, our beauty and spa operations, which include professional services and sales of products, accounted for approximately 80% of our revenue, fitness membership fees accounted for approximately 14% of our revenue, and tuition and other beauty school related activities accounted for the remaining 6% of our revenue. We believe that this revenue breakdown will continue in the future. We generally open our facilities to members and clients 12 hours a day and 7 days a week. Currently, our fitness centers average 34,500 visits per month and our beauty salons and spas average 21,500 visits per month.
Our services and products are tailored to high end customers who appreciate quality and personal service from trained professionals. This customer base, coupled with the growing demand for health and fitness facilities in China has positively impacted our revenues, irrespective of the recent slowdown in China’s economy. We do not anticipate that our business will be materially negatively impacted by the current economic conditions in China. "
Why you must do your own Due Diligence
On an earlier post tonight I stated the dating of the next dividend for Manitoba Telecom. I just went to my on-line broker and noticed that they are stating that March 11th is the ex-dividend date. The company says it is March 16th. See:
http://ca.news.finance.yahoo.com/s/04022010/30/lin...
So Thursday a gaggle of dividend scalping traders are going to sell their MBT thinking the dividend is payable to them. The buy side during this time is, you guessed it, will be the broker who put out the misleading information and stands to earn the dividend instead. This happened to me about two years ago and I complained to the broker who told me that the stats, price history and charts are not trustworthy and not always accurate. Too bad for me. Better to be buying for a dividend well ahead of the shareholder-of-record date, after reading what the company says about the dividend, not the broker.
Re: Would you consider this to be a bullish looking chart?
Hi team, lot of back and fill on decreasing 7 month volume... The $ 15.30 area would look pretty good, if she falls back.... just mhao
PDAC Cup
Hi All - Colorado over Vancouver - 2 to 0 with 11:00 min. left in the first. (Now 3 to 0 w/ 6:00 min in the first). Look for a let-down and a close 3rd - not. Go Avs - Happy Trading
Re: Loannetter,
Hey Loannetter.
Cotton = textiles = fashion = descretionary spending
Not good.
http://en.wikipedia.org/wiki/Men%27s_Underwear_Index
Moreover, if you want physical cotton, like physical gold, you need to buy some tillable acreage in the Deep South and harvest it yourself.
Re: PDAC Cup
Wanna bet?
Re: PDAC Cup
Wanna bet?
Re: PDAC Cup
Hi Billi - You asked - lets say 10 shares of one of my favorites. CEE (Centamin), but don't feel bound - no doubt its 4 to zip now in the 2nd. Gotta get back to the tube. Go Avs - Happy Trading
Re: Loannetter,
True, but Dr. Evil and his band of merry pranksters have been breeding Billions of pesticide-resistant ( except for Monsanto brands )boll weevils ready to be unleased in time for the summer growth... This should drive King Cotton toward $ 500 per bale, and MON to $ 400/share ( These are conservative estimates, of course !! )...
Re: Would you consider this to be a bullish looking chart?
Nah, that's nuttin. How about this? Index of top 20 Mongolian Stocks...
http://www.bloomberg.com/apps/cbuilder?ticker1=MSE...
Up 32% YTD! Hands down the top global exchange performance YTD.
Re: PDAC Cup
Try 4-3....Here come the Canucks
Re: PDAC Cup
Luggie, I'm getting cold feet, just like trading. Think I'll cancel the trade (can you do that?)
Re: PDAC Cup
Hi Billi - Lets dedicate the first annual PDAC Cup to the many miners lost to mining accidents through the years. To honor the Avalanche victory?(4 to 3 @ the start of the third) here is some history in Colorado. Happy Trading
http://www.gjsentinel.com/opinion/articles/avalanc...
NJ Transit customers will see another rate hike. 25% May 1
NJ Transit customers will see another rate hike. This time 25% starting May 1. This is on top of an increase recently. http://bit.ly/d0BjPV.
MTA, who controls the NY Subway, Metro North and Long Island Railroad has it even worse! $800M budget deficit. Cha ching!
So now we have credit contraction, rising prices and taxes, no job recovery, and commercial real estate on a cliff. Nothing to see here. Move along and turn on the boob tube. Someone page Obama and put the camera on him.
Re: PDAC Cup
Lost Miners dedication for sure!
Thanks for the history...good stuff.
Re: Washington DC
Mark/Bankchamp,
I see from your profile that you are a fellow Illinoisan and from Champaign. Thanks for sharing your recent trip to DC and your profile, which not many here post. I read your blog and found it interesting.
Re: Dividend Stocks
I bought EDE last summer which is Empire Electric. They've paid around 7 per cent for a long long time. Check Google and enter the Max time and you can see since 1987 they have been real regular with no hiccups. I believe they have just about finished their new power plants and are due to come online this summer. This will free them from buying power from an outsource utility.
Good Luck
RSI SCAN
Stumbled across this RSI scan article/tool and thought it might be of interest to many here... I'm in the process of playing with it right now...
It's a link to a StockCharts blog- here it is in tiny form...
http://tinyurl.com/yb9rr4k
KC
edit: Played with it a bit. It is designed to find oversold/overbought stocks in an uptrend/downtrend using simple moving averages and RSI (5). Spat out a list of 23 companies- I looked at the charts. Most interesting two I saw were FLO and MNRO in terms of being bounce candidates with an easily definable stop.
Not trading advice, and I'm certainly not an expert...