Four things that caught my eye while I was enjoying some R & R

Yes, Modelprice Guy was enjoying some time off from the blogosphere and using the 4th of July to do some catch up before the second quarter earnings announcements.  While away there have been some interesting events that have caught my eye.

In no particular order:

Research in Motion (RIMM) – Last Friday RIMM reported an EPS loss of US$(0.37).  Translation – business is slowing down faster than previously thought.  To add insult to injury RIMM announced a further delay of their BB10 device in Q1/13 versus Q4/12.  We have updated our Model Price charts to reflect RIMM’s Q1 results.

Research in Motion with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

For those interested, a daily updated chart of RIMM subsequent to this post will be maintained on Facebook, here.

Just for history sake I have included the long-term chart on RIMM.  As you can see RIMM traded at a valuation of EBV+9 back in 2008.  And while our long term chart on Facebook doesn’t go back that far, RIMM traded at EBV+10 back in 2000.

Research in Motion with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

I have included a link to my last blog post on RIMM back on May 15, with the title, “RIMM – Broke EBV-3, Is the Big Whoosh Coming?”.  I would say being down 20% last Friday, June 29, 2012, would qualify for the “Big Whoosh”.

So What Happens Now?

As I mentioned in my blog post, investors will leave RIMM for dead.  Hopefully the obituaries have been written and the world continues on.  Than one day, maybe later on this year RIMM transits up through EBV-3 while nobody is watching – with updated balance sheet EBV-3 is now US $ 11.18.  (Yes, coming out of the blue!).  And who knows maybe RIMM scales the heights of EBV+9 again, for the third time.

U.S. HealthCare Ruling – History was made last Thursday, June 28, 2012.  Chief Justice Roberts was the deciding vote in a 5 to 4 decision on Obama’s healthcare legislation.  This will be analyzed and discussed for the next 100 years, at least.  Who would have thought that Chief Justice Roberts and Tommy Douglas were soul mates?  I realize my U.S. readers will not get the reference, so I include a Wikipedia link.  (Hint: Tommy Douglas was one of Canada’s most left leaning politician!)

Bob Diamond – “When a Silverback Gorilla falls from the tree the other monkeys scatter”

Bob Diamond, CEO of Barclays Bank, finally resigns this week after one scandal too many.  I would say Bob was one of the great alpha males running a global financial institution much the same as Jamie Dimon, his U.S. counterpart running JP Morgan Chase.  I read the above quote somewhere, I believe it was in the Financial Times and it stuck with me.

My prediction is that these “Silverbacks” or alpha males will be drummed out of the business.  These big risk taking global financial institutions will be defanged and made into utilities with drab boring managers running the business.  The jig is up!  Every country now knows they have to stand behind these risk-taking institutions when the “bets” they make don’t pay off.

Just as the Silverback Gorilla is on the critically endangered list so are these CEO’s, I believe.  I have written on blog on this back on May 28, 2012, here, where I note several U.S. Money Center banks trading at big discounts to their own book value because the market doesn’t want these big risk-taking institutions either.

Europe Agrees to Banking Supervision

The market rallied heavily on the news that Europe agreed to some sort of banking supervision going forward.  The details of this agreement were not to be had, however, this does go in line with my blog, “My Six Thoughts and Observations on the Euro”.  Germany moved “slightly” on bank supervision and the world markets jumped for joy.

Global Investors will have to get use to this.  More Europe integration will happen, but it will be a process.  Focus on model price charts will keep your, (and mine) anxiety down and focus where it should be – buying good companies at good prices!

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