2007 Q4

MAJOR MOVEMENTS

The housing market continues to do go downhill and spread its damage from sub-prime mortgage lenders to home builders, hedge funds, Structure Investment Vehicle funds (SIV) and eventually to the big banks. Particularly hard hit is Citi Bank and Canada’s CIBC. You know it’s bad when it hits the big banks and turn the world’s no.1 bank (Citi) into no2. I am glad that I get to live and invest through a major market crash like this on my first year of investment. Am impossible situation is the fastest way I know to grow and learn as long as I don’t die from it.

My efforts to spread into different sectors in anticipation of the credit freeze have flopped though. I couldn’t hold my greed in check and bought bank stocks when I believe they couldn’t fall anymore (based on their dividend/price ratio). My pharmaceutical stocks which usually doesn’t follow the normal market is falling like the rest of the market. My bet in AMD’s revival went into vapor as Barcelona sees a whole year of delay. I am partly to blame though since I have experience in designing chips and knows that a redesign of the TLB should take a year.

THINGS TO NOTE

Apart from the global housing crisis, I started looking forward to new possibilities which will cause the next credit freeze. One possible future strife could come from all the 0% cash advance cards that are offered by major banks. If my assumption is correct, only 10% of the population who takes advantage of these cards will be able to hold back on spending these money and actually grow money out of it. Which leaves the rest of the 90% in deep shit when the 1 year deadline arrive and the interest rate reset to 20%.

There are already reports of people using this type of credit cards to pay their mortgage as well as report of people falling behind on credit card payments. I spent some time researching the banks that offer these cards and amongst the bigger players, Bank of America and Citi Bank offers the majority of these cards. I bought Bank of America this quarter and this finding gives me second thought on the value of their stock.

This year also marked the coming of private equity buyouts. Basically another way of saying hedge fund. I give them about 1~2 years before everything comes crashing down.

CHANGE OF DIRECTION

I have started investing in the gaming industry seeing that some of my best stock picks are in those sector. It’s only natural that I started digging deeper into this sector since I grow up with gaming. Now that an initiative to capture the “normal” population has begun, we can see the future of entertainment to be gaming based. The timing of Activision and Blizzard merger is perfect for me and I bought their stocks without hesitation. The same intuition I had when I bought Nintendo.