What Do You See?

  • The secret in these charts
  • The end

This is going to be a big week.

It could be the biggest week in the history of Port Phillip Publishing.

I’ll explain why in a moment…


Overnight, the Dow Jones Industrial Average fell 26 points, or 0.15%.

The S&P 500 index fell 3.79 points, or 0.18%.

In Europe, the Euro Stoxx 50 index dropped 23.5 points, or 0.75%.

The FTSE 100 index closed down 0.78%, while the German DAX finished 0.76% lower.

In Asian markets, the Nikkei 225 index is currently down 185 points, or 1.05%. The Hang Seng is down 176 points, or a 0.84% loss.

The Shanghai Composite index is down 0.28%.

In Australia, the S&P/ASX 200 index is down 11.47 points, or 0.22%.

On the commodities markets, West Texas Intermediate crude oil is trading at US$42.88 per barrel. Gold is trading for US$1,239 per ounce.

The Aussie dollar is worth 77.17 US cents.

The secret in these charts

Let me ask you a question: when you look at a stock chart, what do you see?

Be honest.

Let me show you a few examples. Which stocks these charts represent isn’t important. It’s only important for you to tell me what you see…

chart image

Source: Source: Bloomberg
Click to enlarge

chart image

Source: Source: Bloomberg
Click to enlarge

chart image

Source: Source: Bloomberg
Click to enlarge

I’ll ask again: What do you see?

If you’re like most people, you’ll mention something about the price. You’ll say it’s a ‘price chart’ or that the line represents the ‘changing price of a share’.

You may choose other words to describe these charts, but 999 people out of 1,000 will give an answer that references a stock’s price.

If that’s your answer, you’re right. You get a passing grade.

But the question of what you see in the chart doesn’t just have a single answer. The answer you gave (if you said ‘price’) is just the most popular answer — the answer given by 99.9% of people.

But, there is a second answer. It’s the answer that very few people would give, perhaps only one in 1,000.

That answer: Time.

Remember, a chart has two axes. The horizontal and vertical. Most folks tend to focus more on the vertical axis. They want to see where the stock has been and where it’s going.

It’s right that investors should look carefully at the vertical axis. But too many investors (probably 999 in 1,000) don’t pay enough attention to the horizontal access.

Because according to one controversial economist, Phillip J Anderson, ‘time’ is the thing that matters most when it comes to understanding the cycles of almost anything. That includes property, commodities, and stocks.

It makes sense. Yet, it’s hard for most folks to grasp the importance of time when a chart representing time is so uneventful.

Look at the chart again. While the price of stocks moves all over the place, time remains constant…it doesn’t do anything. It’s just that flat do-nothing horizontal axis.

That’s why most investors ignore or underestimate the importance of time.

However, this attitude is already changing, and is set to change further. Among the few people who understand the importance of time are subscribers to Cycles, Trends & Forecasts.

Cycles, Trends & Forecasts is an entry-level service, which focuses on what Phil Anderson calls the ‘Grand Cycle’. And the most important influence of the ‘Grand Cycle’? That’s right, time.

It’s the passage of time, and the key patterns created by certain timeframes, that has a much bigger impact on the world’s economy than most people would think.

In a recent report exclusively for Cycles, Trends & Forecasts subscribers, titled ‘The Real Estate Cycle in Acton: July 2014–April 2016’, associate editor Callum Newman explains how the cycle will play out.

I can’t reveal the details here. The Cycles, Trends & Forecasts guys are highly protective of their intellectual property. All I’ll say is that, if you have a bearish view of the market like me, we could both be in for a surprise.

The bear market that I see coming for stocks could still be a few years away from happening.

Why do the Cycles, Trends & Forecasts team believe this to be so? It’s because they study time just as much (maybe more) as they study price.

To them, price is only one part of the story. It’s only half the story. Think back to the price charts I showed you above. There are two axes: price and time.

If you’re only paying scant regard to the time aspect of a chart, how can you possibly hope to fully understand what it’s telling you?

It would be like a mechanic telling you he only looks at the accelerator, not the brakes. The accelerator is important, otherwise your car won’t move. But once it’s moving, the brakes are pretty important too.

You get the picture?

That’s why this week, we’re excited to launch a new service from the team at Cycles, Trends & Forecasts. Over the years, we’ve introduced our subscribers to a number of new trading services and trading ideas.

But I’m confident this new service is like nothing else. The trading approach, methodology, and theory behind it is like nothing I’ve ever seen — and I’ve seen plenty.

To find out what it’s all about, straight from the Cycles, Trends & Forecasts team, check your inbox around an hour from now. You’ll receive the first part of a special four-part video series, where Phillip J Anderson and Callum Newman explain exactly what’s in store with this new project.

Remember, check your email inbox around 6pm tonight.

The end

It was with regret that I read this news story this morning in The Age:

ASX-listed video streaming pioneer Quickflix has called in a voluntary administrator after a restructure and cost cutting failed to save it from increased competition.

In a note to investors, founder and chief executive Stephen Langsford highlighted a shareholding by rival streaming service Stan as a key stumbling block for the ailing business.

Stan is jointly owned by Nine Entertainment and Fairfax Media, publisher of this website. It acquired the $10 million in redeemable preference shares from US studio HBO in 2011.

Quickflix’s market capitalisation is currently just $2.22 million.

“Despite Quickflix being first to the streaming market and holding a leadership position in 2014, ongoing growth has required capital for continued investment in content and marketing,” Mr Langsford said in a statement to the ASX.

“Neither Nine Entertainment nor Stan have ever participated in any capital raisings to assist Quickflix’s growth and its ability to raise capital from any source has been constrained by the redeemable preference shares.”

You can bet that, unlike with the demise of the big car makers, the Aussie government won’t cough up a few billion for an ‘assistance package’. That’s fine with me. But it would be fairer if the car makers didn’t get a handout either.

But that’s not the main reason for bringing up this article. The main reason is that Quickflix Ltd [ASX:QFX] was one of my worst stock picks.

I picked it when it was trading for around 12 cents, and then eventually told subscribers to sell when it was below two cents. That will not go down as my finest achievement.

But it’s also an example of what you could call ‘first mover disadvantage’. The conventional thinking is that if a company can be the first, or among the first to develop a new product or service, they’ll rake in the profits.

Quickflix shows you that’s not necessarily true.

The business started in the early to mid-2000s, renting DVDs through the post. It built up a nice business that way. Quickflix even made the shift to online streaming in the early 2010s, following the model of Netflix Inc [NASDAQ:NFLX] in the US.

Unfortunately, while Quickflix was among the early movers, it never gained any kind of dominance in the market. In fact, it could be fair to say that by the time Netflix entered the Aussie market last year, it’s ‘first mover’ status was a hindrance.

Nine Entertainment Company [ASX:NEC] and Seven West Media Ltd [ASX:SWM] opted to develop their own streaming platforms. Plus, they had the advantage of owning a bucketload of their own content, which they could add to content owned on licence from others.

Add to that the ability to market their streaming services through their own broadcast networks, it was always going to be a struggle for Quickflix.

Quickflix shares have been suspended since last August. The company appears to have been running on the smell of an oily rag since then.

Take this as an important investing lesson: as good as a company’s story may seem, investing is risky. Never invest more than you can afford to lose.

Lesson over.



PS: Once more, don’t forget to check your email inbox tonight for the first part in a special four-part video series from the Cycles, Trends & Forecasts team. Tonight. 6pm. Don’t miss it.


End of day market data

If you have any ideas about what you would like us to include in our end of day market data drop us a line at letters@portphillipinsider.com.au, and type ‘Market data’ in the subject line.

52-week highs: 29 stocks, including Aconex Ltd [ASX:ACX], Appen Ltd [ASX:APX], Clinuvel Pharmaceuticals Ltd [ASX:CUV], Perseus Mining Ltd [ASX:PRU], and SeaLink Travel Group Ltd [ASX:SLK].

52-week lows: 17 stocks, including 3P Learning Ltd [ASX:3PL], MZI Resources Ltd [ASX:MZI], and Spring FG Ltd [ASX:SFL].

Note: The stocks listed above are stocks that hit an intra-day 52-week high or low during today’s trading. The stocks didn’t necessarily close at the 52-week high or low.