RIM: Right or Rong and Is This a Double Top on the Markets?

by JDH on February 2, 2013

As we start February I had planned to take swingtrader’s advice and write about RIM.TO – Research in Motion Ltd., henceforth to be known as simply Blackberry, and title this post with the alliteratively correct but grammatically incorrect “RIM: Right or Rong?” I was planning to point out that on September 24 RIM was trading at $6.18 before commencing a remarkable run all the way to $17.80 on January 24 on speculation that the ne BB10 devices would be great. Alas, it was a “buy on rumour, sell on news” scenario, and with the announcement made RIM is back to $13.

Compared to $6.18 that’s still more than a double, so is RIM a buy?

I have no idea. I haven’t owned it since it was trading in the $60 range, and I have no plans to jump on board now. Investors were not pleased that the new device will not be widely available in the U.S. until March, and the devices with physical keyboards will not arrive until the spring, so the jury is still out on the eventual future of RIM. I can report from my discussions with employees at RIM that they are all pumped and excited, and expect the new devices to do well.

I was surprised that they changed the name from RIM to Blackberry. I understand that no-one outside of Waterloo, Ontario where they company is a huge employer ever thinks of the company as RIM, so for the world perhaps the re-branding makes sense. However, if you call the company Blackberry, that’s all you will ever be.

Will Apple change their name to iPhone? No, because Apple is more than just an iPhone manufacturer. They make computers, and sell content through iTunes, and will no doubt develop other products in the future. RIM, in addition to the “crackberry”, has excellent enterprise security technology, and has the Blackberry Messenger product that is the reason many people use the Blackberry. That technology could be licensed to others, and could be a significant revenue stream. Now that the company is just “Blackberry”, I can only assume that they will never create any new products, and that they will be selling off their enterprise and messaging technology. That’s sad, because it’s risky to put all of your eggs in one basket. Time will tell.

I was going to talk about that, but instead I’ve decided to address the biggest story of the week:

DOW 14,000.

For the first time since October, 2007 the DOW closed above 14,000. All is well. Life is great.

And yet I have this nagging feeling that all is not well. (I am not alone. Sunseeker commented that “I’m sensing a trap“, because when the Main Stream Media like the BBC starts telling everyone that we have “turned the corner” that generally implies that the end is near).

The U.S. Bureau of Labor Statistics issued a very precisely worded press release on Friday, stating that the U.S. jobless rate was essentially unchanged. By “essentially unchanged” they mean that the unemployment rate went up from 7.8% to 7.9%. A more accurate title would be “Unemployment rate increases”, but that’s not happy talk, and bad news won’t make the market get to 14,000, so better to “spin” the numbers.

And spin they did. The CES Net Birth/Death Model eliminated 314,000 jobs in January that were previously reported. That’s a good way to mess with the numbers. Of course the real unemployment rate is much higher than reported, because if you don’t count people who have given up, and if you play with the Birth/Death Model, it’s not that hard to get a number under 8%.

Anecdotally we know the situation is worse than reported. Last week I chatted with a person who is a manager at a large grocery chain in Canada (Loblaws, which operates Zehrs in Ontario). Zehrs is perhaps the worst run grocery chain in Canada. The produce section is often filled with old produce. When you ask an employee if they have anything fresher, they always say “sure, I’ll get you some from the back”, and they do. They leave the crap on the shelves until some sucker buys it, and then they bring out the fresh stuff, but of course by the time they bring out the fresh stuff it’s not fresh any more, having sat in the back for a week. (And we wonder why no-one wants to eat fruit and vegetables).

I guarantee you that you can walk into any Zehrs store today and find expired product on the shelves. We’ve all learned to pay close attention to expiry dates on milk and other items, otherwise you get home and realize you just bought something that expired yesterday. But again, Zehrs realizes that most consumers won’t take the time and effort to review every date on every package before they buy, so they can get away with a horrible distribution system.

But I digress. My point is that this manager I spoke to was bemoaning the fact that a group of suits from Head Office had descended on her store and were looking for a way to cut another 200 hours per week of employee time. The store is grossly under-staffed as it is, as evidence by the fact that the shelves are not properly stocked, and yet the geniuses who work for Galen Weston can think only of cutting. Why not invest in better products and a better customer experience? Nope.

Therein lies the dichotomy. Official government statistics say that everything is fine. The stock market is on fire. And yet, for the people on the street, the real people, it is obvious that we are in a recession. Senior citizens who worked and saved for their entire life are stuck earning zero on their investments because the government wants to keep the cost of money cheap for bankers, but because interest rates are so low bankers aren’t lending.

I asked last week if this was the mother of all double tops.

I guess we will have to wait and see.

Thanks for reading; see you next week.