i've done some brief reading on the debt-to-capital ration to understand its importance in the current financial situation. the following formula represents the ration as per the Investopedia definition:



the interesting thing is that in times like now, reserve banks are cutting their prime lending rates to ensure economies do not collapse. it therefore begs the question if having debt is a pro or con. much like having bought a debt-financed asset, any cut in the rates should be received as positive. however, the real concern is the current and future cashflow of the asset to repay its debt.

in terms of running a search on a few parameters - EPS Growth of greater than 5, divident yield above 10%, long term debt to equity below 5 with large market cap - only Impala Platinum Holdings Limited (IMPJ.J) made it through this search criteria - with a consensus EPS of 14.31%, div yield of 13.11%, dept-to-equity of 3.13 and a market cap of 6.7B (USD). obviously this depends heavily on the commodity price ... yet out of the 13,553 global stocks screened, only 13 met the set out criterial visualised in the following scatterplot:



might be wise to choose a low leveraged, steady EPS with a fair dividend yield over the next few months...

it seems that after the rate cuts by the BoE, it's not looking any better on the iTraxx index - spreads are still wide and risk is generally still too high for anybody to admit we've reached the bottom.

interestingly, SA is still hovering at 15.5% prime and nearly choking the economy!! it wouldn't hurt us to cut rates - note that South Africa, due to its reserve controls, was hardly affected by subprime and is merely living throught he secondary effects of a global recession - yet our goverment does not want to be seen as following suite of the international bank.

a prediction from a colleague was that we should be down  +-3% by mid-2009 to around 12.5%. lets put that into writing and benchmark next years levels)))) lets see if December brings a cut, and more to follow.

this topic is nothing new... yet once again im surprised by the sheer lack of competativeness (or affordability for that matter) of bandwidth within the local South African market.

now, having been operating in the hosting space for over 10 years it seems that fundamentally nothing much has changed: we're paying a massive premium for underdeveloped infrastructure and while the consumtion rates are growing massively (as we move from MBs to GIGs), the prices dont scale equally!

why are we still paying per MB rates to Tier 1 providers when the international scene has changed massively. Trying to secure any rate lower than R60 / GIG ($6 / GIG) for hosting traffic or below R48 / GIG ($4.8 / GIG) for DSL traffic is near impossible. Fine, a few contacts and a bit of arm wrestling allows one to negotiate these yet the model doesnt scale!! Compared to a service such as Amazon EC2 of $0.17 / GIG, we're simply living in a different world! While I'm quite against international hosting out of principle (and for obvious latency issues), it does really beg the question of how we could be 30 times removed from the rest of the world....grr... same ol debate, same ol answers...

Found this little snippet on the we regarding the following claim:

"Legg Mason’s star stock-fund manager Bill Miller said on Wednesday the “bottom has been made” in U.S. equities and that the Federal Reserve should consider purchasing stocks and junk bonds to pull the United States out of the financial crisis. Speaking at Legg Mason’s annual luncheon for media, Miller said that all long-term investors believe that stocks today are cheap."

Indeed, stocks are cheap today and viewing dividend yields in light of stock value surely seems attractive. A stock thats lost 50% of its value will surely push the relative yield to new highs though at the risk of a largely deflated stock value! While large blue chips with low leverage, steady annuity revenue and a sustainable business model will probably survive the crisis, we're not certain to have hit rock bottom yet!

Might I be reminded of my Legg Mason SE Asia Special Situations investment (RCSEASS SP) out in Asia - an email to my good mate Brian on the 14/12/2007 announcing "have a look at this puppy...22.44% return in 9 months". However, on 04/12/2008 this lil punt paints a very different picture...reviewing http://www.leggmason.com.sg/en/pdf/factsheets/SGPSASS.pdf with a mark-to-market up until 31/10/2008 shows NAV 0.788, about 50% below the entry price...hardly a time to make any bold claims about anybody considering to buy back into the markets!

Had a good catch up dinner tonight with a mate. A few might know him, an Irish fellow with a keen property interest)) Great touching base, simply recaping the last few months and the current state of the markets. Intdeed, cash is king and anybody with a fair portion of their investment in cash (or base rate linked leveraged finance for that matter) should be financed... its all about cash flow - having it and managing it.

It was direct to FT Alphaville which seems to be an insightful blog published by intelligent people. The particular item of interest is the iTraxx Crossover beaing the European CDS benchmark which broke through the 1,000bp barrier. This is a slight reason for concern as a the widening of the spread seems to be oppositely corrolated to the market movement - a wider spread maps onto a weaker market or vis-a-vis. The chart further seems to imply that the CDS spread is about four (4) months ahead of equity market trends ... implying that a peak in the spread should indicate a four (4) month lead on the bottoming-out of stock markets.



Why is this interesting? Out of personal interest in the general state of the economy (and more specifically real estate), one could assume that a peak in the CDS spread would give about a 12 month advance signal of the economy (and therefore real estate) market recovering. While we have not yet hit this point and are anxiously waiting for this signal, its worth building up a cash reserve to be in a position to make an agressive move in early 2010.

Stumbled over Collective2 today, an interesting concept of a community site into which one publishes algorithms - either for free or under paid for subscription. These algorithms determine when and what to buy (or sell) based on various rules of either pattern or parameter based decision logic.

It is interesting to see the developments of Covestor. Following experts with less emotional or rash decision making certainly makes more sense for retail investors. It takes the individual overreaction out of the market. A few individuals are seen as organic leaders within the community and others simply trust them based on the track record and trading history.

It does raise the question if this type of herd mentality has not lead us to the point of the current market situation: endless downward spiraling? If a community leader has a fair following, certainly any action he takes would be compounded in the market based on the subsequent trade events. One could argue that the infinite liquidity of actively traded instruments would simply absorb the subsequent group trade events; yet times of limited liquidity would challenge theory. It is possible to further argue that certain trading strategies are successful because of the exact timing of transactions while trailing buyers (or sellers) would have a less favourable return; possibly even negative.

Busy pushing out some mails pertaining to the turnkey ASP trading solution I'm putting together... a few more items to finalise. Pricing providers are going to be Interactive Data, price distribution LightStreamer, trading systems from IT Software, exchange connectivity using BT Radianz, DMA access using FIX 4.2, portal technology being DotNetNuke, SalesForce for CRM, direct SMPP connection for SMS trade notifications, hosting split between Borsa Italiana (Italy) and Internet Solutions (South Africa)...should be an interestingly-complex solution. If this project starts on 1st of January 2009, I aim to have DMA Equities trading onto the JSE up-and-running in live testing by 1st April 2009. *will be done...watch this space)))*

will now attempt to take live the social trading network site... it was a project I started earlier this year together with my trusted developer Paul, and we completed the front-end visualisation and back end data store for the the community driven investment portal. the functionality is principly ready and must now merely be placed and populated by the external scavanger services sourcing the data. all account, trading and open positions will be fed regularly from a verified back-office into the publich front end. users will be able to navigate the community site and track each other's performance.

worth noting is that the socail trading network functionality was completed in June, way before CMC launched their TSN in late October. interesting first hand seeing how lack of planning and poor execution in moving a project from dev into production results in high opportunity costs (or losses for that matter).

lets get it live asap, and I'll write more about this project soon)))

strange, never given much thought to marrying... seemed very distant and unlikely back in the day with Tamara... and even now it still sends shudders at any though of such serious and long term commitment... been there, done that, lived in mediocrity))) *jokes but call it youth* anyhow, now that Heiko is "foregoing his freedom", even Felix mentioned that "we should start considering [marriage]"... i guess he is, in what one generically calls "a situation". *hehe*. Considering though that Marko took the leap, Helmut long before, Gavin is quite settled... we're lookin at them dropping fast! In light of this frenzy (as it merely is hyped up nonsense), I dared to take the "marriage predictor" test on Facebook...*anxious drumroll* ... which spat out ... 4 years and 1 month to go. Four (4) years ... aint that bad... seems plausible... leaves plenty of time and would certainly be the right age... means no rush, pressure and at least a finite date to work toward))) i'll try avoid the topic until then)))

Heiko's big day finally came... unknowingly. He was misled by his fiance that the bachelors was going to be held another day, thus not prepared for our suprise visit and days worth of adventouring. Needs to say, he was surprised and quickly roped into our planned events...a few drinks to start, 30 Seconds with penalties, tied to traffic light on Bayers Naude, paintballing for the rest of the afternoon... really good fun.... tiring.

Night of 1000drawings was great... a well planned event that speaks to the entire art community...with a good cause for the Paballo charity. Glad that Felix had been so involved, his heart really goes out to the initative and its purpose. He's also had strong opinions of getting Intdev involved and I'm glad to see it bring our company more together. The individuals really respect the project, its purpose and work hard to support the logistics of the annual event. Stephan and Ennie helped marvously at the event with Nhlanhla.assisting in the preparations.