Corp info: China Life Nov 08

Nov MTD premium up 16% and YTD up 53%; Trend MTD premium growth keep dropping from Jul's 99% to 94% in Aug, 53% Sep, 42% Oct and 16% Nov. Still look reasonable to me, because its agents are not selling based on commission but by salary and bonus. If they met their quota earlier, they will try to stop selling and leave everything till next year.

Econ data: 08 week 49

• US Nov pending home sales down 0.7% (better than expect -3%)
• US new weekly jobless claim up to 573k (worse, 525k) , 26 years highest, but it is kind of expected, so no surprise;
• US Nov CPP rise 0.1% (same, 0.1%), no deflation
• US Nov PPI down 2.2% (worse, 2.0%)
• US Nov retail sales down 1.8% (better, -2.0%) and ex-auto down 1.6%;
• China Nov CPP up 2.4% PPI up 5.6%, further slow down but i think China's economy is ok;
  Bank of Canada cut interest by 75 bps to 1.5%, but bank's prime interest only cut 50 bps to 3.5%, further interest rate cut will hurt banks interest margin;

Google 3q08 results

It is a company provide free online search engine service with a market share of 70%.
Inc stmt: 3Q08 revenue up 37% vs prior yr, operating income up 31%, profit up 28% and EPS up 27%.

Bal sht: Google has $8.4B cash and with no debt at all (which is great), total assets contains 19% of intangible asset & goodwill. During these years, Google is so aggressive in acquisition and merger activities. With closed to $5B goodwill, it means Google purchased companies with a price higher than what the book value worth.

Risk: 1) Bad economy usually hurt advertisement industry, 2) Competition from Yahoo & Microsoft 3) low cost for advertisers and internet users to switch from one online search engine to another; 4) stock compensation plan looks consistent too high compare to other companies. 5) new product such as Google phone may have lower profit margin

Opportunity: 1) if bad economy trigger the advertiser to switch from traditional media to online search engine/website, then the online advertisement should do far better than historical co-relation between economy & industry advertisement income; 2) new product development, even may lower profit margin, but further diversify the product segments looks health to company's future growth

Current price $315, 08 fwd P/W ratio about 19.2. If the coming 6 years profit growth is 25%, 24%, 23%, 22%, 21%, 20%, then EPS as of 2014 will be $55.4, assume future growth of 18%, Google's stock price should be able to rise to $1000 by the end of 2014.

Of course, a more realistic target value will be $480 based on 11.5% discount rate.

Econ data: 08 week 48

USA has confirmed a recession and down turn started from Aug 07 and recession has continued for 16 months so far, it will be the longest recession (but very slight so far) other than great depression. However, recession confirmation is a extremely difficult task, its starting date usually require # of revised and changes. Also, this time, it doesn't follow the tradition way (2 consistent quarters with negative GDP increase) to confirm a recession (as i shared b4, it doesn't have to follow the tradition way).

However, the tradition way do give us some insight about when this economic mess will end. In the past 30 years, USA has experienced 6 recessions, the GDP growth only show 2 quarters in negative position. That means, if recession was started in Jun /Jul 08 (based on tradition way), one should be able to confirm it will end at around Mar or Jun 09 based on historically pattern. Once again, head back to the "real" recession period started from Aug 07, the recession period this time will be around 19 months to 22 months.

Please don't be mislead by my comment and thinking the end of recession = recover = huge gain in stock market. It just means it is a start of recovery and how long the recovery will take is an unknown. The worst scenario is a extremely slow GDP growth in the coming 10 -20 years like Japan. Hopefully, it won't happen.

• US Nov ISM manufacturer index down to 34.2 (worse than expect 36.2);
• US Nov ISM service index down to 37.3 (worse, 42.0)
• US 3Q wages up 2.8% vs prior yr from -2.6% in Q2, but lower than historical average of 3.6%.
• US latest weekly jobless claim down to 509k (better, 540k) but continue jobless claim rise to 4.09M, highest since 1982 (to be fair, today USA's workforce is 50% more than 1982, so it is in fact still better than 1982) • US Nov cut 533k job (worse, - 335k) and unemployment rate rise to 6.7% or 7.3M in total (better, 6.8%)
• Canada 3Q GDP up 1.3% vs prior yr (better, 0.9%), but 4Q forecast is not good;
• Canada Nov cut 71k job (worse, - 25k) and unemployment rate rise to 6.3%
• Europe ECB cut interest rate from 3.25% to 2.5%;

There is another worry about deflation. In my opinion, it is less likely to happen. Yes, oil price and food price fall more than 50% from peak, but it doesn't fall too much compare to prior year. Also, core inflation is calculated excluding oil and food price. Other than home price (which has already fall 17%), retail, electronic, utility, telecom cost will not decrease too much to cause a deflation.

Market:
It is once again interesting to see how the market interpret the job cut. Investors hope the unemployment result will force the globe government to have additional intervention to boost economy.

In fact, the unemployment results look funny: how can job cut higher than expect by 200k while unemployment rate 0.1% lower than expect? Those 2 results are not consistent to each other. As one should remember in Oct job cut of 240k and cause a rise in unemployment rate from 6.1% to 6.5%. Why 535k job cut only cause a rise of another 0.2%?

There are 2 reasons: 1) people who get lead off gave up to looking for a new job; 2) cuz to define a person is "unemployment", that person has to look for jobs for 4 consistent week. Therefore, we should expect the unemployment rate to catch up in Dec. It should rise to at least 7.1-7.2% (even if there is no more job cut, you wish!!)

So if the equity market walks along with economic data, then the market will fall in Jan 09. Again, this is just my reasonable guess only.

TD Bank 4q08 results

Although i said i don't care any bank other than TD & Royal Bank, I still did an analysis and compare all the bank in Canada's 08 annual results (highlighted means the best among the 5):

	TD	BMO	CM	BNS	RY
net income	-4.1%	-7.2%	-162%	-22.4%	-17.1%
total equity	12.5%	12.3%	-21.7%	7.2%	-5.8%
EPS	-11.4%	-8.5%	-163.3%	-24.6%	-19.6%
BV	25.8%	13.2%	-11.7%	8.5%	-16.4%
Return on Equity	14.4%	13.0%	-19.4%	16.7%	18.0%
Net interest margin	1.9%	1.6%	1.5%	1.8%	1.4%
Fee / Tol Rev	41.8%	50.2%	-40.2%	35.0%	56.6%
Cost / Revenue	56.4%	65.5%	63.2%	64.9%	63.1%
Tier 1 Capital	9.8%	9.4%	10.5%	9.3%	9.0%
bad debt ratio	0.5%	0.6%	0.2%	0.2%	1.0%
current price as of 12/4/08	41.92	34.05	46.18	32.26	37.17
P/E	8.56	9.06	(7.84)	10.51	10.90
P/B	1.14	1.06	1.57	1.70	0.79
The Best in Sector	7.00	1.00	1.00	1.00	3.00

You can see why I am only interesting in TD & Royal bank now, cuz they are the best, with 7 "best" and 3 "best" among sector.
(Please note, CIBC has 10.5% Tier 1 capital higher than TD's 9.8%, but mainly due to capital injection, so it doesn't deserve to be the best).

In Dec 09, just 5 days, Bank sector fall 9.5%.
In normal day, price is very attractive, but because there is highly uncertainty involve for Canada's economy and the real estate market. That's why i said i will buy if it fall 20%. TD will be my top choice, but other than that, I won't just you to buy any other one includes Royal Bank.

Manulife 4q08 results

MFC forecasted it will loss $1.5B in 4Q08 due to lower of equity market. This brings the 2008 full year net income down from $4B to $1.1B or down 72.5% (EPS will down to $0.77). Finally, the financial result tie to what I expect to be reasonable (still a little higher, 4Q loss may go up to $2.0B instead of $1.5B in my opinion.)

Since my previous target value has already took into account of the 4Q loss by assuming its 2008 net income less dividend equal to zero. No assumption will be changed.

However, Manulife plan to raise $2.1B capital and borrow $2B from banks to maintain its AAA credit rating. Do so; it will dilute the share value of the existing shareholders by 7% or YTD average of 1.75%. So I will readjust my target value from CA$32 to CA$31. Given CA$20.0 per shares, it is still good buy.

Econ data: 08 week 47

We will have the latest USA employment data by Friday. Job position is expected to cut 300k and unemployment rate expected to rise to 6.8%.
Analyst expect Canada will cut interest rate further by another 50 bps in early Dec & USA will cut to 0.5% from 1% on Dec 16th (i may be wrong about the date).
I think at least 25 bps is necessary.
Situation in Thailand should not affect or at least won't make the economy go worse. Feel sorry about the political situation there and the HKG Christian's death. Also disappointed about HKG government's slow reaction. Let's pray for Thailand and the global economy to recover or at least reach the bottom sooner rather than later.

• US 3Q GDP revised from -0.3% to -0.5% (still better than expect, -0.7%), latest expectation GDP will fall 2.8% in 4Q08 and fall 0.9% in 1Q09.
• US durable good order fall 6.2% (worse, -2.5%)
• US Oct personal income rise 0.3% vs Sep (better, +0.1%)
• US weekly jobless claim fall 14k to 529k (better, 537k)
• US Oct new house sales fall 5.3% vs Sep, drop to 433k (worse, 450k) and inventory rise to 11.1 month from 10.9 month in Sep.
• US Sep home price fall 17.4% vs prior year
• US weekly mortgage application rise 1.5%, still too low, need to see the trend of improvement
• China cut target lending rate by 108 bps to 5.58%, saving rate down to 2.52%. Good for economy, especially real estate and utility sector, will increase bank / insurance companies' potential revenue, but may have negative impact to long term investment spread
  Europe Oct unemployment rate hit 7.7% vs Sep 7.6%