Friday, November 14, 2008

Short Takes #5: Market Bottom, Nortel, and Carpooling

1. I think it’s funny that the day after CIBC predicted a market bottom (the web page with this article has disappeared since the time of writing), stock markets in Canada and the US dropped 4-5%. It seems to be human nature to listen to these predictions when all evidence shows that nobody knows what will happen to stocks in the short term. I believe those who say that current stock prices will seem low looking back 5 or 10 years from now, but that doesn’t preclude the possibility of another 20% drop in the short term.

2. The Big Cajun Man asks if Nortel is a dinosaur, and discusses its prospects and planned reorganization.

3. Ellen Roseman asks who will be responsible for credit card fraud when credit card companies start giving us “chip and PIN” cards. Credit card companies would love to make consumers responsible for fraud based on the reasoning that the system is secure and the customer must have done something wrong. However, it is impossible to use even a chip and PIN card safely. Consumers are expected to insert their cards and type their PINs into a device supplied by a stranger. The consumer can’t control the risk in this situation. The risk should continue to be borne by credit card companies and banks. If the new technology is more secure, then the credit card companies and banks can look forward to lower losses due to fraud.

4. When negotiating, Thicken My Wallet advises: never throw out the first number. I’m left with the image of two people sitting silently staring at each other. It’s amazing how few people can withstand long pauses in a conversation.

5. Preet starts a new job, and plans to explain in his blog how the financial industry works from an insider’s point of view. He also plans to create financial products with lower fees to benefit investors.