Thursday, 7 March 2013

New tech and new highs . . .

This is great. Watch this video to see how bike wheel hubs really work and also watch some cool technology . . . 

The catch with this one is that these hubs are heavier than what you'd see normally on a top end road bike. The parent company of Gokiso is Kondo Machine Works Corp which I'm unable to decide if it's listed or not on any of the Japanese exchanges. The technology looks to be derived from their activities producing industrial grinding machinery, specifically high-end spindle wheels and associated bearings . . . which when you look at some of their machines makes a lot of sense as something that can be leveraged into wheel hub production. As much as I hate what the Japanese have done and are doing to their economy it's companies like this that always puts a smile on my face. I'd love to get more information as to who owns the company, but my guess is that the President Mr. Kenji Kondo is either the founder or the son of the founder as the company was established in the 50's. Investors should always look out for transformational tecnology such as this wheel hub because often it signals a change in direction or growth phase for a company. I'm not a big fan of micro caps (Kondo Machine works has 100 employees and ¥19.15m in capital) but often they can lead to an opportunity. Look out for Mr. Kondo's wheel hubs. 

The Japanese Yen is still trading at the weakest point in some years and part of me thinks that it's run very hard on the jawboning of the new government and the appointment of a new BoJ Governor. 

Committing the country to a debasement of the currency is like telling the world you'll never pay back your debt, but as most of your bonds are held by your own population that might not matter if your population shrinks enough. It's like a ponzi scheme . . . if you die before the country defaults you don't worry because you got your money out. I kind of want to play contrarian and buy the JPY here, but doing that in every other QE-addicted market has been such a loser that you know if you did that you'd want to be pretty light on your keyboard and take profits quickly. This one is for the pro's only.

Obviously you'd expect Shimano (7309) to track the JPY like most Japanese exporters. For the cycling investors here's the stock chart.

I'm not sure how many Japanese companies are trading at all time highs, but here's one with return on equity at over 10% v. a Japanese Government Bonds trading at closer to 0.5%. There's reasonable growth and if you trust the management to execute on their leisure focus based on the baby boomer retirement patterns it probably remains a stock to watch.

It's good to get away from looking at Australian markets. I think the problem for many Australian investors is that they allocate very little to international equities and to be fair that's been an OK strategy during the recent resources boom. Now though it seems to me that a look at Asia and beyond would be advisable. I know I've always said that ETF's are dangerous products because of the possible failure of an issuer. That of course misses the benefits of ETF's that have given many the opportunity to invest in a more diverse set of equities that normally either wouldn't be offered on an easily accessible exchange or would be prohibitively priced in terms of brokerage. 

It's always worth checking the various listings of any investments you are interested in. Australians for example all know about the BHP v. BLT dual listed arbitrage, yet few bother to try and invest in the London version of BHP because it remains in the "too hard" basket. The Australian line still trades at around a 20% premium to the UK line and if while I think it's a very long shot that the dual listed structured for BHP or Rio Tinto is ever collapsed it might make some sense if you thought that the new CEO's at either company were inclined to adopt a position of splitting out units into individual companies. Rio for example is dominated by iron ore and because of the failure of their move into Aluminium was reluctant to do anything at the corporate level until they stabilised the balance sheet. Much of the same story goes for BHP, who if anything have a better balance in their structure and have the experience of doing this before when selling off their steel division. The easiest way from a compliance point of view would be to collapse the dual listed structure and issue shares on new entities. I could be wrong, but even if it's a small possibility I bet the various investment bankers are spending lots of man hours trying to come up with something that allows directors to un-lock value etc. I wish I could see some of the presentations.

Tirreno-Adriatico is now with us and we probably shouldn't be surprised that Omega-Pharma Quickstep took out the team time trial as it was anchored by Tony Martin. That means that Mark Cavendish as team leader gets to wear the GC jersey for the first individual leg. I've only seen the short youtube highlights so far but the wet weather looks to have added some spice to the day.

I managed to see the extended highlights of stage 2 of Paris - Nice. A really exciting sprint finish to this one:

Kittel was good, but earlier around the 20km mark not covered on these highlights Tom Boonen goes very hard and toys with the peloton. Clearly this is a training exercise for the Belgium champion ahead of the northern classics. Boonen for mine is looking good. His compatriot and reigning world champion Philippe Gilbert doesn't seem quite as comfortable, though he's not that far off the pace. As I said previously Paris - Nice is not my favorite race to watch, but it does have it's moments.

Finally I managed to get out this morning for a ride on the Pinarello. No news on the Cannondale yet, but I'm keeping my fingers crossed. I was a bit late leaving home at 7am and at times I felt like every tradesmen's truck and 4WD in Sydney's eastern suburbs was trying to knock me off my bike. I tried to keep cool and by the time I hit the beach front at Bondi I had decided to head to the safety of one of my usual cafes. 

Not a great rides in terms of the numbers, but definitely a success in terms of surviving morning traffic. The lesson here is get out at 6am or wait until after the rush hour . . . 


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