The Canadian economy has been the talk of the town recently with the dollar reaching parity with the American dollar for the first time since 1976 and the housing market really heating up. These things are both offsetting the effects of inflation and helping to keep the economy running along smoothly. Luckily our economy right now is really based on trading natural resources and with our agriculture. Grain prices are reaching their highest levels in a long time and thats helping farmers make money. Oil is always at or near the highest level it has ever been so thats helping out the Oil companies. The problem with such a hot economy is that it is bound to cool off eventually its just a matter of when. The USA is having a lot of problems recently with its crisis on sub prime lending, a cooling housing market and the poor state of their economy. A lot of that will have trickle down effects into Canada. Today, to add to the whole mess, is a strike by GM workers at their Saginaw plant. This is going to cause over 80,000 workers in Canada to be layed off as a result of the disruption in the automobile creation chain. With such a large lay off this will be a devastating blow to our economy. Unemployment numbers are going to rise big time and the longer the strike lasts the more harm that will be caused to the economy.
So with the high Canadian dollar hurting exports and then the GM layoffs raising unemployment, the economy is going to be in for a great shock. It is hard to believe that this will all just pass by and we will be unaffected. My prediction is for a recession in the USA followed by a recession in Canada. The USA will be harder hit but Canada will be going along for the ride with this one.
The Sask Wheat Pool (TSX: SWP) officially announced their new name for their company today in Balgonie. A new name was needed for the company as a way to show the recent merger of the Sask Wheat Pool and Agricore United. The new name is Viterra which isn’t a word you can find in the dictionary. The word itself seems to contain the word terra which is latin for earth or land. With a made up word like Viterra it will take some getting used to for farmers who have been using the Wheat Pool name since 1924. With the amount of influence the company has on the Canadian prairies we will be seeing a lot of the new name. To me, it sounds a little like Viagra, so maybe its just what this old company needs.
It has been rumoured that Sony is going to drop the price on the newest model of their Playstation 3 once the existing supplies of the 60gb model have been sold through. They are expecting the old models will be sold out by October which just so happens to be the time that Microsoft AAA titles will be releasing for the Xbox 360. The 80gb PS3 is currently retailing for $599 and the 60gb is selling for $499. With news of future price drops it only leads to speculation that Sony fears they are losing the console war. Sony has a lot riding on their console as it is also pushing their Blu Ray movie format. Consumers will ultimately decide whether this price drop will be enough to keep the PS3 alive and the Blu Ray format for that matter.
Sirius Satellite Radio (NASDAQ: SIRI) announced today that they are partnering with Loral Space and Communications (NASDAQ: LORL) to build a new high powered satellite. The satellite will have a 15 year service life with 20 kilowatts at its end of life. This will be the 6th satellite in their fleet. The fifth satellite is currently in production and is scheduled to be launched next year. They also have a fourth satellite that sits in storage. This new satellite will more than double the power of the fleet and let Sirius enhance performance for the customers.
With this new increase to power I expect we will start to see the Sirius Video coming out shortly. I think this will be an interesting market for them as they will be able to challenge the likes of portable dvd players and portable video games for the entertainment in the vehicle market. As well, it would be interesting to see further developments to portable devices that allow for receiving satellite video on the go. Imagine iPod video device with streaming video from the satellite. Sounds good but its still a few years away.
Menu Foods Income Fund (TSX: MEW.UN) took a steep plunge today after they announced that they are recalling about 60 million cans of wet dog and cat food. The recalled food has been linked to numerous deaths in pets, affecting their kidneys. This is turning into a very big issue since this company makes pet food for 88 different brands. For a complete list of recalled food you can check out Menu Food’s site for dogs and for cats. I wonder how long before there is a class-action lawsuit filed against Menu Foods and these pet owners sue for emotional damages of a lost pet.
So today after the news has become widespread, Menu Foods faced the music, it fell $1.35 (24.55%) to $4.15, although my feeling is that it will continue to slide. Many of the customer who had previously bought dog food from these brands will no longer feel they can trust this company, thus many people will switch. This should increase the demand for the competitors products, such as the Purina brand which is owned by Nestle, and Meow Mix which is owned by Del Monte Food Company (NYSE: DLM).
Gmarket Inc. (ADR) (NASDAQ : GMKT) shares has been steadily decreasing in value for the last week after they announced their 4Q profit being up 78 percent. The shares have found themselves just above the $15 mark, which is getting closer and closer to their 52 week low of $12.28 and a far cry from their 52 week high of $28.00 which makes me wonder why is the stock slumping. Could it be that the auction market for Korea isn’t that big? Could it be that, even though they are making a profit, it just isn’t that much revenue? Whatever the case, with the stock readjusted to its current pricing, it seems like it could be a takeover target. The current lower demand for Asian stocks is surely just temporary and this stock is bound to bounce back sooner than later.
At long last, after much speculation and rumour, XM Satellite Radio (NASDAQ: XMSR) and SIRIUS Satellite Radio (NASDAQ: SIRI) have announced they plan to merge. This merger has been a long time coming with speculation starting many months ago. Both companies have been struggling to increase their talent lineups while increasing their subscriber counts. The merger will have to meet antitrust approval before any merger would be allowed. Although there would only be one satellite radio company, it is believed they are in direct competition with other forms of mobile entertainment like mp3 players, and mobile phones. I believe that a merger is critical if satellite radio is going to survive. It is tough for two companies to try to share in a pie that isn’t particularly large especially with big named talent like Howard Stern demanding large salaries. It will also be interesting to see how this plays out with the Canadian subsidiaries since they aren’t entirely owned by SIRIUS and XM, and they might require approval from the CRTC.
After news of the merger, shares of both Sirius and XM increased, with Sirius closing at 3.70 up 2.78% and XM increasing to 13.98 up 7.7%. Not a lot of details were released that actually explain how the new company is going to work or even a new name. Mel Karmazin, CEO of Sirius, would become CEO of the new company. It makes me wonder how the new company will deal with having two different types of satellites, and excess amounts of terrestrial repeaters. Maybe after the merge they will attempt to move their operations into Europe??
SIRIUS Satellite Radio (Nasdaq: SIRI) are making some lineup changes for February 14, 2007. On their Canadian site, they list the changes that will be affecting their customers. They removed the Who channel, ABC news and talk, ESPN Deportes, EWTN Catholic, and Hot Jams. They are bringing in Nascar, some Play-By-Play channels, Foxxhole, Siriusly Sinatra, Metropolition Opera Radio, and 90’s alternative.
The American Site has some different updates. They are losing Hardcore Sports Radio, C-Span, Sports Byline, and Revolution while gaining the 90’s alternative, Sinatra, and Foxxhole. I have a feeling people will be upset by losing any of their programming. Some people probably liked the Hardcore Sports Radio, or C-Span and losing them will only make people upset. I wonder if there will be any consumer backlash because of these changes. We will find out soon enough!
On January 17, 2007, FCC Chairman Chris Martin mentioned that “there’s a prohibition on one entity owning both of those licenses.” This was in the reference to the SIRIUS Satellite Radio (Nasdaq: SIRI) and XM Satellite Radio (Nasdaq: XMSR) merger discussion. This kind of statement seems like a common response by a person high up at the FCC. If he had said anything else, it would suggest the FCC was in favour of antitrust action before a study was conducted on whether the merger would in fact be considered an monopoly. Now that all depends on how you look at it: if you only looked at satellite radio then yes the new company would be a monopoly; although, if you considered all forms of mobile entertainment as competition, then it would most definitely not be a monopoly.
Investors however don’t respond well to news like this. After Chris Martin’s comments, shares of XM dropped about 10 percent to close at $15.45 while Sirius shares fell by about 7 percent to $3.86. Not surprising at all since these were probably the same investors raising the stock last week when the merger talks were really starting to heat up. I have a sneaky feeling that this won’t be the last we hear about a possible merger though. Both the satellite radio companies are facing a lot of competition from the mobile music market and need to do something to stay ahead.
Gmarket Inc. ADR (Nasdaq: GMKT), for the second day, continued its upward explosion on the markets. After opening the day at 23.95 the stock soared upward to reach to a new 52 week high of 27.75 which is up 18.24% on the day. This is great news for Yahoo who has a large stake in Gmarket. Some have been speculating that if Yahoo is going to make an online auction/retail push in North America it will be through the Gmarket name. As well, Gmarket looks like it will be able to take a large portion of the Chinese and Japanese markets if/when they expand their operations.
As I was saying yesterday, the increase in Gmarket is being based on news that eBay (Nasdaq: EBAY) is not doing particularly well in the Asian markets. There has been news about a joint venture with Tom Online (Nasdaq: TOMO) to be 51% controlled by Tom and 49% controlled by eBay. The name for this new joint venture is going to be TOM Eachnet. Tom was up big-time yesterday but is falling back down today 3.94% today. I am wondering how this joint venture will affect Baidu (Nasdaq: BIDU) as it was reported before that Baidu would provide text-based search advertising on Eachnet. That deal was previously struck by eBay and I wonder if it will carry forward to the new joint venture. Baidu is up 1.6% today to 118.98. I am expecting that Gmarket will drop before the day is done!