Tuesday, March 27, 2007

Kiva

For the past few months or so, I have been involved as a volunteer translator with Kiva, a San Francisco based company that provides a platform for people to make micro-loans to small business owners in developing country.

I first got aware of Kiva when watching PBS' coverage on the company and its borrowers and partners in Uganda. Actually in the past year Kiva has been gathering a lot of press coverage. Most recently, Nicolas Kristof from NY Times did a very nice op-ed , (and watch the video!), with a very descriptive title "You, Too, Can Be a Banker to the Poor."

I think Mr. Kristof's coverage nicely summarizes why I support Kiva. Growing up in indonesia, I learned that pure charity doesn't really work in most cases, as it often encouraged dependence and irresponsible spending. However, most of the businesses that Kiva targets are mostly ignored by banks. Well, in most developing countries, where securities markets are not so liquid, the traditional commercial bank is the main source of capital, so it can be choosy. If you one is not operating a cell phone network, oil refineries, power plant, millions of hectares of soy or oil palm, etc. the banks will probably not look at its loan proposal. The other alternatives that these small business owners use to have was individual loan broker that charges ridiculous interest and term. In Indonesia these people used to be nicknamed lintah darat or "land leech." This article (in indonesian) describes how a lintah darat uses thugs to collect loan and charges 20% interest for one month loan (that's like 240% a.p.r.). For you finance geeks, the one month Indonesian rupiah government bond annual yield ranges from 9-12% in the past 12 month, and consumer lending rates charged by banks were in the 16-20% range. So the lintah darats charges like 200% premium spread. However given that most of the micro-business owners are uneducated, they are unlikely to be able to even read and fill out a bank or government loan form.

With Kiva, individuals with Paypal account can lend these micro-business owners. Kiva lenders does not charge interest, however the local partners may charge interest to cover its operational expenses. Like banks, Kiva also makes the business owners accountable for the loan they receive. Over the course of the loan, the entrepreneurs are required to regularly update Kiva and their lenders with updates on their business through a journal. As you can see it's not as sophisticated as 10-Q's or 10-K filings, but at least it teaches accountability.

I was skeptical about the model at first. Considering that by western standards, the credit quality of these borrowers would be even beyond sub-prime by developed country standard, I expected very high default rate. So the first time I lent, I thought of it as charity. However, I was pleasantly surprised when I learned later that after over 30,000 lenders have contributed more than $2.5 million in loans, the default rate has been almost zero. Well, about 4% of the loans are behind schedule, but I still find the numbers really impressive.

I found that reading the journal can be touching at times. It is so satisfying that the $50 I lent to a small business owner 10,000 miles away is helping someone lift his or her living standard, and it cost me nothing (well the lost opportunity cost of earning interest which is insignificant).

So what are you waiting for? Start logging in to Kiva and instantly become a banker to the poor.

Wall Street Journal Taught Me How to Make Perfectly Cooked Steak

I came across a recipe on how to make a Perfectly Cooked Steak in Wall Street Journal. The recipe was prepared by chef Laurent Tourondel of BLT (Bistro Laurent Tourondel) restaurant in New York. I printed it out and put it in my kitchen folder for a while. This weekend I tried making the whole course set (steak, creamed spinach and mushroom) and I have to say I am satisfied with the result. The mushroom recipe was surprisingly good, now I know why those porcinis are nicknamed hen of the woods, it tasted like young chicken or hen.

I had 2004 Big House Red that I bought for $7.99 from Whole Foods with the meal. It was pretty good match, not to mention that the wine was good value.

So pleasantly surprised how WSJ could teach me how to make perfect steak too, besides the perfect portfolio. :)

The WSJ version requires subscription. Here's a link to a free version from Charlotte observer.

Note: I had about 1 inch steak and cooked it in the oven for 10 minutes after searing (Recipe said 14 minutes for 1 1/2 inch steak for rare/medium rare). I was aiming for medium rare, but it ended up medium well so I would constantly monitor the steak to check for doneness. But the recipe (or Chef Tourondel should I say) discourages from sticking a thermometer because it will let the juices run out.

Thursday, March 22, 2007

Merrill Lynch Attempts to Limit Access to Its Research

Today, Merrill Lynch announced that it was "taking aggressive steps to curb distribution of its research, including restricting and delaying media access and establishing licensing agreements." For more complete coverage, here is a link to a version of the news from Reuters. The company said that its research was being "napsterized."

I am interested to see how successful Merrill will be in this endeavor. This sounds to me like a desperate measure to restore profit from research, which has been eroded badly after the dot com bust. A while ago, Steve Jobs said that in music DRM hasn't really worked and probably will never work. I doubt that Merrill will be able to curb distribution of its research, unless it manages to lock its clients in a room without access to the outside world, telephone and internet. It is 1000 times easier to share information contained in a Merrill report (opinions, upgrade/downgrade, target price) than breaking DRM and making bootleg copies of MP3's.

I mentioned a while ago in this blog, investment research was in the process of getting commoditized anyway, partly as result of new regulations like regulation FD that came after the scandals involving many star analyst during last dot com boom and bust. Sell side analysts are currently barred from having privileged access to executives and information. So there is no information that is available to Merrill analysts that is not available to other analysts and the general public. So the only "value added" part of a Merrill report is pretty much the analysts' opinion and interpretation of data. Well, I concede that sell side analysts tend to be smarter and have deeper industry insight and experience than the average Joe. Apparently analysts' opinions still carry some weight, evidenced by how their rating upgrades/downgrades can still influence stock price movements. But I wonder how much the market values sell side researchers after all the scandals few years ago. And Merrill is not the only research house around. It will be interesting if other research houses will follow Merrill's move. There are a lot of insightful opinions from smart people that are available for free in the internet. For example, you can get Henry Blodget's view on the market for free from his blog. (BTW Blodget was a former Merrill analysts back in the day).

In my opinion it may be more productive for Merrill and other sell-side research houses to figure out new business model for their research rather than trying to fight the inevitable democratization of market information.

Wednesday, March 21, 2007

Everything Filipino in Bay Area

If you live in Bay Area, or plan to visit, and like everything Filipino (or is it Pilipino?), you gotta visit this cool list in Yelp. This is the best guide to anything Filipino in the SF Bay Area so far.

Thanks Eugene!

BAYAN KOOOOOO!!!!

Monday, March 19, 2007

PageRank

Some interesting PageRank result (according to my Google toolbar):

Google: 8/10
Yahoo!: 9/10

Yes, Yahoo! has higher PageRank than Google. At least this increased my confidence a bit that Google is not manipulating its own PageRank.

If you want to know which sites has a PageRank of 10, visit this link at www.seocompany.ca.

Addendum: OK, I am talking about the main portal page here http://www.google.com and http://www.yahoo.com. Yes, each individual pages in the domain have its own PageRank. And PageRank is not a measure of traffic, but how mostly by counting how many page links to it, more like like in "citation count" in scientific journal publishing world. Thanks for all the friendly emails from my Google and Yahoo! friends.

Thursday, March 15, 2007

What Do You Think About Pfizer?

Wow, it seems that people don't have much respect for Pfizer, the giant drug company that dedicates itself to humanity's quest for longer, healthier, happier lives through innovation in pharmaceutical, consumer, and animal health products. I was browsing through the Biofind Rumor Mill, a message board where pharmaceutical and biotechnology industry insiders share "insightful information" about the industry and players.

This thread titled "5 words that come to mind when u hear Pfizer" attracted my attention today. And at the time of writing, I can only find five neutral/positive posts in there. two of which were at the beginning of the thread:

* Caring, happy, children, smiling, women.
* ha, ha, ha, ha, ha

Well, it went downhill from there. Most of the positive toned comments I found were mostly about the company's leading Erectile Dysfunction pill:

* PILLS THAT GIVE GREAT ERECTIONS!
* My Grandfather Has Sex Now!

And another one is not really an opinion, but hinted at Pfizer's possible M&A strategy.

* Looking to buy Abbott Labs

Some of the classic ones:

* I've no intention of staying
* change, turmoil, lack of productivity, downhill, demise
* You paid Hank how much?

There are some other good ones in the thread, but I decided not to post them here. I am trying to keep this site at least PG-13 rated.

Well, I suspect that the people who posted in the thread are probably mostly disgruntled Pfizer (former) employees. And like everything else, people who are happy about something tend to be quieter. But I think this thread suggested that Pfizer's PR has some work to do.

Disclaimer: I and my relatives don't own Pfizer stocks, but I own some Abbott stocks.

Funny HomeWork Answers

OK, while researching for my last post, I found these funny homework answers at EclectEcon. I wish I was that creative when I was in school.

Financial Contagion Party

Last night I went to a party. After a few hours pigging out and drinking wine and limoncello, someone started a discussion about the recent stock market downfall, asking why Chinese selloff triggered selloffs elsewhere in the world (e.g. US and Europe). Well, if all those pension funds, mutual funds, hedge funds and other savvy investors got out of Chinese stocks, shouldn't it increase demand for financial assets elsewhere? So why did US and European equity market went down also, instead of going up? well I had hard time answering the question myself. I remembered vaguely from my very limited reading that even economists had come up with hundreds of explanations, but no consensus yet. The best answer I could offer was the usual herding behaviour theory and the empirical fact popular after the 97 Asian crisis that markets are quite highly correlated, and therefore prone to financial contagion.

OK i got home and geeked out. So I searched "financial contagion" at Wikipedia and I found that Wikipedia article on financial contagion is well, still disorganized and a little too esoteric for most people. But I think this is the main point: "Despite of substantial progress in research, there is still no consensus on definition of contagion. Generally it may be defined as an excessive unanticipated increase in cross-market linkages after a shock to an individual country (or group of countries). ... Researchers argue that interdependence can be measured and anticipated. However, an existence of extreme, asymmetric patterns of excess volatility that can not be explained by fundamental links between economies has led experts to suggest that contagion - rational or irrational - can be the only remaining explanation." Which means that "Financial contagion" is the interdependence between financial market that experts cannot explain.

Then I found this nice page on financial contagion in World Bank's website. I am pleasantly surprised that this one was a little easier to read, but still concluded "So, What Is the Ultimate Cause of Contagion? This is a very hard question to answer. As you can find in this web site, different papers point toward different directions. "

OK if an army of smart people with average IQ of 180 or higher can't explain this, how can I explain? Here's my answer... Thanks to EclectEcon.

Friday, March 09, 2007

To Kill a Brand (PS3)

A video about how Sony killed the PS3 brand. Better than many analyst reports out there.

Video credit: "How to Kill a Brand" by Doc Adams.

Friday, March 02, 2007

Where's my Wii?

OK initially I wanted PS3 for Christmas. But during our Christmas shopping, my fiancee spotted a Wii demo and she got hooked. So we scratched out PS3 and decided to get Wii instead. Ok after trying (not so) hard we didn't get any Wii under our Christmas tree. I didn't manage to get Wii for my recent birthday either. It's simply flying out of the shelves faster than I can say Wee. However, to my surprise I have been able to spot a stack of PS3's at my local BestBuy and Target. It's been tempting to grab one but $700 is a steep price to pay, and we don't even have an HDTV yet. So for now we decided to continue watching patiently for any Wii's to show up in our friendly neighborhood retailers' shelves.

it's impressive, that Nintendo with Wii has been able to overtake Sony's dominance in thie new gen console war. Look at this sales chart, courtesy of vgcharts.com. Yes Sonny was behind, because it had production problem, even now I think Nintendo has more production capacity for Wii than Sony does for PS3, but I can't find my Wii and find a small stack of PS3 inventories. Does this mean that Sony's in trouble?

I still plan to get a PS3 sooner or later. I got hooked to the Metal Gear and Final Fantasy series, but maybe I can live with Mario and Zelda instead. Or maybe if PS3 truly tanks, Konami and Squenix decides to move the Metal Gear and Final Fantasy to Wii instead. hummm. OK I'll start saving again to make up of the money I lost in the last few days in the stock market bloodbath.