Archive for the ‘Money Stuff’ Category.

TD Waterhouse

I don’t usually complain about stuff like this because I realize that there are very few people who are truly on the ball when it comes to their jobs, and the chances of finding them in a front-line support/retail position are slim to none. So when I phone up a company and ask for something, I’m not surprised if it isn’t done right, and I don’t complain if I have to phone again to get it fixed.

But damn, this one really takes the cake.

Around mid-August, on prompting from my dad I started the conversion of my TD Waterhouse cash accounts to margin accounts. Sounded simple enough, they’d probably just have to twiddle a bit or two on their side and I’d be good to go. Haha, right.

First an explanation of TDW’s account numbering. Account numbers are six digits long, the letter after them denotes the account type: A=Canadian Cash, B=US Cash, E=Canadian Margin, F=US Margin.

  1. I began this adventure with two accounts: 123123A, 123123B
  2. Phoned them up asking to change the accounts from A/B to E/F. The guy says I have to go into a TD branch to fill out and sign some forms.
  3. I do that the next day, but the forms are actually electronic and on TD’s intranet. They’re identical to the new account application here, save for a single question at the beginning asking for my current account number. Being suspicious, I explicitly confirm with the rep that these forms are for an account change, not a new account. She assures me this is the case, and photocopies my driver’s license to go in with the application (more on this later).
  4. The following week I get a package in the mail. “Thank you for opening a margin account with TD Waterhouse. Your new account numbers are 456456E/F.
  5. I phone them up and exclaim “WTF?” The guy tells me it isn’t possible to change the status of an existing account, they can only create new ones. Fine, so I ask them to transfer all assets from 123123A/B to 456456E/F, and close 123123A/B.
  6. A couple days later I log into the website and see six accounts: 123123A/B/E/F and 456456E/F. Again I exclaim, “WTF? Lying bastard, they can change existing accounts just fine!” They’ve transferred my assets by this point, but all accounts are still open. So I take the opportunity to phone them up and ask that they transfer from 456456E/F to 123123E/F, then close 123123A/B and 456456E/F.
  7. The next day I receive a letter saying that I must send in a photocopy of my driver’s license for account 456456E/F or risk paying higher commissions. Gee, what went in with the application in step 3?
  8. Within a couple days everything looks good and I’m happy.
  9. The following week, all of a sudden everything is transferred back to 456456E/F, and all accounts are closed except for 123123E. Yes, you read that right, it completely blew my mind too.
  10. Everything is fixed within a week and I’m happy again.
  11. Later, I try to place an online trade and it says, We cannot accept an order for account 123123F at this time. The person on the phone tells me, “Oh, it’s because 123123F is about to be closed, so it doesn’t allow trades. At this point it’s been about 6 weeks since step one, so I give up and switch brokerage houses. Kidding, but it’s been a real test of patience.

There’s an old adage that says you should never attribute something to malice if it can be more easily explained by ignorance, incompetence, or just plain stupidity. Sounds applicable, but in this case I really have to wonder.

Doom 3 and Nvidia

Doom 3 came out last week. It looks really nice, gameplay is the same old, and the multiplayer is laggy as crap over broadband. Its release has wider implications though. The short of it is that now looks to be a good time to pick up NVDA shares.

Remember a couple years ago, how Nvidia was the darling of the video card industry and ATI was the red-headed step child? Now remember how those sentiments reversed themselves practically overnight when the NV30 (GeForceFX) cards were released? There’s no consumer loyalty in this industry, and being made up of predominantly teen and pre-teen males, they are strongly succeptible to peer pressure.

It was hard for anybody to understand how Nvidia could charge so much for a card that was late, an underperformer, took up two slots and had a cooling solution as loud as a vacuum. It got so bad that their marketing people even released an unofficial video making fun of themselves.

Well it all makes sense now. Turns out that John Carmack requested certain Doom 3 features be implemented in hardware, which Nvidia agreed to do, architecting the NV30 with his requests in mind. They were then left holding the bag for about 18 months, the length of time that Doom 3 was late coming to market. I guess you could say NV30 was ahead of its time.

Well it’s paying off in spades now. You see, Doom 3 should really be looked at as a technology demo for its game engine. Since Quake, id has been licensing their engines to third party developers, and Doom 3’s engine is no exception. Their only other real competitor in this respect is Epic, with their Unreal Engine 3. However, the first game based on UE3 isn’t expected to be released until 2006.

Which means that the majority of “next-generation” games that will be released in the next couple of years will be based on the Doom 3 engine. Good for Nvidia, bad for ATI. Just skimming review sites and forums, I already feel the rumblings of the tide turning against ATI, which is why I picked up some NVDA shares on Monday @ $9.55. We’ll see how that goes.

Will Google for Food

Size Does Not Matter

After skimming through Google’s prospectus, I get the same uneasy feeling that I get when someone asks me for handouts. Allow me to explain. It’s easy to lose the forest for the trees when talking about things on a large scale, so let’s examine a microcosm instead.

Say you have this wicked idea for a new widget that you’re sure everyone and their dog will want, except that you’re flat broke, so you can’t even build a prototype. You convince your parents, relatives, friends, and anyone else that will listen to you to chip in for your starting capital. Eventually you raise enough and get to work. Now some questions.

All those people that gave you seed funding… do they have a right to periodically check up on you to make sure that you’re not just spending their money on lavish toys for yourself and living like a king instead of actually building the widget? In turn, do you not have a fidiciary responsibility to ensure that you are maximizing their investment, finding the best way to build and sell enough widgets that you can give a return on investment that matches the risk they took for putting their neck out for you? Of course you do.

The stock market is no different. Its purpose is to match up those that have money (investors) with those that need money (companies). The companies on the market are simply at a later stage in life (versus the example given above), so they are usually quite large in terms of both employee count and annual revenues. Despite their size, the management of a publicly traded company has the same responsibility to its investors. If it becomes clear that management is not demonstrating this level of responsibility, shareholders have a right to invoke any necessary changes.

Don’t like where you work? Blame management. Blaming the stock market and shareholders borders on the comically absurd.

Back on Track

Back to Google, the reason it feels like someone asking for handouts is because of the structure they have chosen. They’ve split their common share pool into two classes, Class A is allowed one vote per share, Class B is allowed 10 votes per share. The two classes are identical in all other respects. The Google founders hold all the Class B, the Class A is being sold to the general public. They intend to raise about $2.7B in this initial offering.

The proposed structure essentially says to the purchaser of the Class A common, “Please give us $2.7B, an order of magnitude more cash than we currently have on hand, but you can’t say anything if we decide to fart it all away on gourmet meals, massages, on-site physicians, and Gwyneth. Because you know, our employees need this kind of thing. Trust us, we went to Stanford.

In other words, they want your money, but all you get in return is their word that they’ll be responsible with it. Sorry, not convincing enough, there needs to be something more to balance this additional risk that they intend to thrust onto the holders of Class A common. Something like a dividend, perhaps? Not a chance. For all intents and purposes, the Class A common are preferred shares, only without the dividend, and without the seniority in the case of a liquidation event.

The prospectus cites companies such as Berkshire Hathaway and The New York Times that have similar two-tier common share structures. What they fail to mention is that the former is essentially a holding company where you pay the Oracle of Omaha (Warren Buffet) to manage your money, and the latter (supposedly) requires such a structure to maintain the quality and impartiality of its news reporting. Google doesn’t have a reason even remotely as good as these two.

So it’s no wonder that they’ve decided to sell their offering as an online Dutch auction, under the guise of “bringing their long-awaited IPO to the common-folk”. The truth is, with the terms they propose, they’d have a hard time selling to institutional investors, so they have to milk retail investors instead.

Imagine you managed the portfolio of the Ontario Teachers Pension Plan[1]. Would you like to be the one to tell your members, “Apologies, some of you won’t be getting a pension this year. We bought $500M worth of Google Class A, and their management arraged it so that we had no control. Then they went off and made some really really bad business decisions. How were we supposed to know this would happen, Larry Page and Sergey Brin gave us their word. Their motto is “Don’t be evil” for christsakes!”

I’ll stick to companies that aren’t afraid to remain accountable to the people bankrolling them, thanks.

[1] The OTPP has some $87B in assets. They didn’t get that big by taking on risks that don’t have a correspondingly large enough reward.