Indeed 1999, marked a relatively fun time in the stock market, with the internet bubble in full swing.  Internet stocks fluctuated greatly on a daily basis, which made for profiable times for day traders.  On Jan 28, 1999, when the deal between Yahoo (NASDAQ: YHOO) and Geocities was announced, Yahoo traded at $367.75, while shares of GeoCities sold at $117. Based on stock prices, the deal between the two companies was valued at $3.6 billion.

Flash forward to today, and Yahoo is stock is now languishing. On a direct comparison, Yahoo shares have traded as low as $8.94 this year.  If you account for the three 2 for 1 stock splits since January of 1999 Yahoo shares were as low as about $72 in Jan 1999 terms.  At today’s current price of $14, the same shares are equivalent to $112, representing a still significant 10 year loss for long term shareholders.

But it’s just as well that Yahoo closed Geocities.  Personal home pages have been eclipsed by the social networking sites, and blog sites, including WordPress and Blogspot.  But it represents the end of an earlier era on the internet.  Speaking of Yahoo, at these levels, short term gains may be hard to come buy, but the stock likely represents a decent long term stock buy.  A good entry point for the stock would be less than $13.

Our last detailed commentary on this investment was in September 2007, which you can find here.  Please read that blog for more specifics on this type of account.  Since that time, interest rates have fallen significantly.  Ford Investor Advantage still offers top tier interest rates with interest rates from 3.45% to 3.75% APR (3.51% to 3.82% APY).  It functions essentially like a checking account, with free checks and no fees for checks written in excess of $250.  You can withdrawal money at any time and as frequently as you would like (unlike traditional money market accounts).  However, given the recent demise of the US auto industry, the money placed there is at greater risk than ever before.

Since 2007, the auto industry has essentially imploded with the global financial meltdown and recession/depression.  GM (NYSE: GM) and Chrysler teeter on the brink of bankruptcy (I personally would not touch GM stock at all). Ford has done relatively better.  Thanks to its plan to mortgage the company for $26 billion in 2006, it has a monetary cushion to prevent it from bankruptcy…for now.

In addition, it recently was able to refinance its debt.  The company retired $9.9 billion of its securities in exchange for cash and shares under terms of the debt buybacks.  It was able to reduce its debt 38% and save over $500 million in interest costs annually.  The company now has about $15.9 billion in debts outstanding.  Ford said it would pay a total of $2.4 billion and issue 468 million shares as a result of the offers.  About $4.3 billion in Ford’s senior convertible notes were tendered under an offer that expired Friday. Up to $344 million will be used to pay cash premiums to note holders.

Ford Motor Credit also participated in this transaction in a separate offer.  It will use $1.1 billion to purchase the secured term loan debt ($3.4 billion were tendered).  Ford Motor Credit previously said a second cash tender offer that expired on March 23 was “over-subscribed,” and it doubled the amount of cash it would spend to buy back the debt. That resulted in the use of $1 billion to purchase $2.2 billion in term loan debt.

So what should investors in the Ford Investor Advantage program take away from all the recent news?  The tender offer leaves the company with a better financial footing, although it is certainly not out of the woods yet, and depends entirely on how car sales will improve this year and next.  I certainly would not leave my entire savings/nest egg with Ford, and would consider other high yielding options such as GE Interest Plus (which pays 2.73%-3.03% depending on your investment size).  GMAC also offers FDIC-insured CDs with a one year return of 2.75% APY.  Bank CDs are also quite attractive these days.   Without this tender offer, I would have been quite cautious about placing more money with Ford Investor Advantage.  In fact, I would have advocated pulling some money out of it given the possibility of bankruptcy.  However, given the extra lifeline it now has, I think leaving existing cash within this account is possible.  However, I would still not risk an entire nest egg with an account at Ford.

Kongzhong (KONG) has steadily increased since its October 2008 low of 2.31, to hit a new 52 week high of 6.74 this past week.  Follower of this blog know that I have been following this company closely over the years.  Looking back at my most recent post in regards to this sector and Kongzhong (KONG) back in September 2007, I was spot on in regards to its price action to over $8.  It indeed was a short term movement as the stock traded back down to significantly.  However, the value of this stock long term remains after its rebound.  It has a sizeable cash reserve that accounts for a good portion of its market capitalization and remains profitable (albeit marginally).  It also recently received an investment from Nokia Growth Partners.  The company received an investment of about US$6.8 million in 5-year convertible senior notes plus warrants to purchase an additional 2.0 million American Depositary Shares (ADS) at US$5.0 per ADS, exercisable within five years.

Shanda (SNDA) has also been a stellar performer.  It has risen from 19 in December to 53 this past week.  In terms of valuation, they are still relatively cheap.  Netease trades at a P/E of 16, with still rising revenue and profitability as the Chinese gaming market appears relatively immune from the global recession/depression.  Although the easy short term gains are gone from these stocks, they still represent good long term stock buys, as the market for China remains enormous when compared to the United States.

At this point, I would no longer rate shares as a buy. In fact, I’d even consider selling at least some of your shares, and holding on to the rest. One day gains can often be fleeting short term.

The reason for today’s climb:
(from Bloomburg)

Chinese stocks trading in the U.S. rose, pushing the benchmark to a record, as speculation that fixed-line carriers will be allowed into the mobile phone business boosted the prospects for wireless entertainment companies such as KongZhong Corp. Inc., Linktone Ltd. and Hurray! Holdings Co.

The Bank of New York Co.’s China ADR Index, which follows China’s American depositary receipts, climbed 4.1 percent to 568.01, the highest since at least December 2001.

Investors were buying stocks in Chinese companies that may supply content such as games and ring tones to the fixed-line carriers as they enter the mobile business, said analyst James Lee at WR Hambrecht + Co. China BAK Battery Inc., whose rechargeable batteries are used in mobile phones, may also be rising on demand from mobile users for improved performance.

“There are expectations that landline carriers may be entering the wireless space,'’ said Lee, who has a “hold'’ rating on Beijing-based KongZhong. “There is speculation that these fixed-line carriers may partner with companies like KongZhong, Hurray and Linktone to get into data services.'’

The country’s National Audit Office said earlier this week that a review of five phone operators will start next month, fanning speculation that the government is preparing for an overhaul. China’s government may seek to merge domestic operators, the Financial Times reported last month, citing an unidentified China Telecom official.

Shares of KongZhong jumped $3.55, or 71 percent, to $8.53. Linktone rose 80 cents, or 26 percent, to $3.85. Hurray gained $1.18, or 25 percent, to $5.82.

damn!

There’s a bubble, and then there’s a fricking bubble. I will point you to two China stocks that exploded 50% in 2 days. For no reason. And they are airline stocks, which languished for an entire decade (1997-2007). Then in 2007, they’re up 1000%, well at least China Eastern Airlines (NYSE: CEA) is.

China Southern Airlines (NYSE: ZNH) - priced at $97 up from the 10s
China Eastern Airlines (NYSE: CEA) - priced at $147 up from the 10s.
Stay far far away from these stocks. There’s bound to be painful downsides to a 50% two day gain. Btw, speaking of China, take a look at Kongzhong (Nasdaq: KONG) and Sohu (Nasdaq: SOHU). What did I tell you…not shabby at all =)

On a personal note, yes I am biased in favor of Burst Media…
the company recently came thru for me, and sold a targetted campaign for my entertainment website (westlife.org).  It’s been years since they’ve been able to do that.  And the client is a damn respectable one…Clinique.  If there’s one great thing to be a Burst publisher, it’s the high ad quality (except those pesky ads from adtegrity that are worth s***).  In addition, they recently changed their payment terms from net 90 to net 45.  I never could understand the net 90.  It meant that publishers had to wait 120 days from the start of a campaign month to get paid.  Anyways, I digress…click thru to westlife.org …the Clinique ad is a can’t miss.

LONDON (Thomson Financial) - Burst Media Corp swung to a first-half net pretax profit but said it expects its full-year performance to be below market expectations, mainly hit by higher than anticipated ad campaign cancellations.

It reported a net pretax profit of 279,000 usd for the six months to June 30 compared with a 703,000 usd loss the year earlier, as sales grew 17 pct to 13.30 mln usd.

The company estimates revenue from the Burst Network will increase 5-9 pct for the 2007 fiscal year as compared to the prior year. Slightly offsetting the softness in revenue growth is projected triple digit revenue growth for Burst Direct and Burst AdConductor.

For the year to December 31, the company expects to report total revenue between 28.5-29.5 mln usd, which will lead to adjusted EBITDA of about 2.4-2.7 mln usd.

And another article….

LONDON (Reuters) - U.S.-based online advertising firm Burst Media (BRST.L: Quote, Profile, Research) said on Wednesday results for 2007 are likely to come in below market forecasts because of higher-than-expected ad campaign cancellations.

Burst, whose share price dropped 60 percent when it warned on 2006 profits almost a year ago, just five months after it floated, said it expects revenue of between $28.5 million and $29.5 million for the year to December 31, 2007.

AIM-listed Burst now expects adjusted earnings before interest, tax, depreciation and amortization of $2.4 million to $2.7 million, it said.

House broker Altium Securities had previously expected adjusted pretax profit of $4 million on revenue of $31.4 million.

The ad cancellations “appear to be a function of heightened competition as high profile players including Google and Yahoo look to increase their exposure to the fast growing online advertising space,” said Altium analyst Roddy Davidson in a note as it cut its recommendation to hold from buy.

Burst said the cancellations had happened since the company issued a trading statement six weeks ago which said it expected to meet 2007 expectations.

The firm also posted half-year results on Wednesday which were broadly in line with Altium’s expectations.

Why the sudden one month 0.38% jump in rates? I can think of two reasons.
#1: The tightening of credit markets, thanks to the home mortgage mess. This could be making it a bit harder for Ford to borrow (I doubt this is a major influence right now, but it could have an impact later on as the economic decline worsens)
#2: What I think is the more likely reason is the increased competition for investor money. Countrywide Bank (aka Countrywide Financial) is offering a phenomenal savings interest rate. Of course, Countrywide (NYSE: CFC) is also desperate for money and capital to keeps its mortgage business running. I mean its stock price has fallen below the $18 that Bank of America is paying for its 20% share. For $10,000, investors at Countrywide can get a return of 5.65% APY on a 12 month CD. For the same $10,000, it is offering 5.50% APY for its money market account. The best part is that there is no risk, even if Countrywide does for some unlikely reason declare bankruptcy. You are FDIC insured.

Thus, with Countrywide’s offer, the spread between what Ford was offering through its Interest Advantage had narrowed to a piddling 0.10%. Ford’s investment product is not FDIC insured. You are in effect loaning Ford money and investing in unsecured debt obligations (rated below investment grade by the major credit agencies) . Thus you run a small but possible risk of losing all your money in the event of a Ford bankruptcy for a small 0.10% investment premium…which is probably a no go for most investors.

That’s the beauty of a free market system. Ford in effect had to raise the amount of interest it is paying out on its accounts, and thus the premium between it and Countrywide has widened to a more acceptable 0.50%.

Plus, the best benefit of the Ford Interest Advantage program versus any type of money market account: the ability to make as many transactions you want. All money market accounts are limited by federal law to a certain number of withdrawls per month (six). On the other hand treat, the Ford account can essentially be treated as a well paying checking account. It comes with free checks, and no fees for checks written for over $250. Ford may not be the safest place for your entire life savings, but it certainly is worth looking at for a chunk of your savings.

Ford Interest Advantage

Countrywide Bank 

This map from the Weather Channel should auto update…and once the hurricane leaves, will probably be a blank image.

China Airlines has a troubled safety record. One of its 747s crashed in 2002 as it flew from Taipei to Hong Kong, leading to 225 deaths. Accidents involving the airline killed about 450 people in the 1990s.