Chaos and confusion

  • Closing soon
  • A loveable fellow
  • Which way for Snap?

We enjoyed this news story from the KPIX CBS affiliate in San Francisco:

California could have to hand over some documents on cellphone use it tried to keep under wraps.

On Friday, a Superior Court judge ruled the state must release papers discussing the possible risks of long-term cellphone use.

The documents were written by the state’s Environmental Health Investigations branch and are believed to contain cellphone radiation warnings and recommendations for public use.

But the state refused to hand them over when requested by a director at University of California, Berkeley School of Public Health.

So Joel Moskowitz, Ph.D., sued the state under the California Public Records Act.

Moskowitz, Director at the Center for Family and Community Health at UC Berkeley’s School of Public Health explained to KPIX 5 the reason he sued, “I would like this document to see the light of day because it will inform the public that there is concern within the California Department of Public Health that cellphone radiation is a risk, and it will provide them with some information about how to reduce those risks.”

When asked why he thinks the state is trying to suppress this document, he said, “They claim that this would lead to chaos and confusion among the public, I suspect that they were afraid of the reaction from the telecommunications industry should they publish this document. In fact, they even argued that in their brief.”

Interesting. It draws a nice parallel with the climate change argument. You’d think that the fear of a scorched Earth and rising oceans, would also ‘lead to chaos and confusion among the public’.

After all, the supposed end of the Earth is somewhat more dramatic than radiation from mobile phones.

So, why would governments freely trumpet ‘end of the world’ scenarios when it comes to climate change, yet keep the dangers of mobile phone radiation under wraps?

Easy. Money. Follow the money.

In the case of climate change, the opportunity for governments is to suck money from the private sector under the guise of climate change.

In the case of mobile phone radiation, the money would flow the other way. By that, we mean it may affect mobile phone sales, which in turn could affect profitability of mobile phone companies, and therefore result in lower tax revenues.

It’s all as clear as day. On with the show…

Markets

Overnight, the Dow Jones Industrial Average fell 112.58 points, or 0.53%.

The S&P 500 fell 14.04 points, for a 0.59% fall.

In Europe, the Euro Stoxx 50 index lost 5.49 points, or 0.16%. Meanwhile, the FTSE 100 fell 0.01%, and Germany’s DAX index lost 0.06%.

In Asian markets, Japan’s Nikkei 225 index is down 27.22 points, or 0.14%. China’s CSI 300 is down 0.28%.

In Australia, the S&P/ASX 200 is down 49.69 points, or 0.86%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$52.76 per barrel. Brent crude is US$55.22 per barrel.

Gold is trading for US$1,233.22 (AU$1,632.33) per troy ounce. Silver is US$17.77 (AU$23.53) per troy ounce.

The Aussie dollar is worth 75.54 US cents.

Closing soon

Your chance to check out Jason McIntosh’s ‘System Q’ closes soon.

Don’t wait. Midnight Monday is when we close the doors. For details go here.

[Note: We deactivate the link at midnight on Monday. Don’t bookmark this email and forget about it, check out the link now.]

A loveable fellow

The Sydney Morning Herald reports:

The OECD has warned of a “rout” in Australian house prices, leading to a new economic downturn, saying both prices and household debt have reached “unprecedented highs”.

Ah, music to our ears. Someone who thinks Aussie house prices are ridiculously high.

Of course, before us ‘housing crash’ junkies start patting ourselves on the back for our terrific analysis and timely warnings, we’ll remind you that we’ve said almost exactly the same thing, almost every day, for nine years.

There are those who say that if we predict a crash often enough, like a ‘stopped clock’ we’ll always be right twice a day.

However, we’ll admit that the way things are panning out now, we feel in mortal danger of not even being able to meet that exceptionally low bar.

As we’ve noted previously, and as ABC News reports here:

A property investor-driven buying spree is continuing to push home prices higher in Australia’s two biggest cities, with Sydney recording its fastest annual growth in more than 14 years.

The latest CoreLogic home price index for February showed prices jumped 2.6 per cent last month in Sydney, bringing the annual price rise to 18.4 per cent.

The champagne corks are surely popping in real estate offices the length and breadth of Sydney’s urban metropolis.

Meanwhile, down south, the political and economic geniuses on Spring Street in Melbourne have their own cunning plan to deal with rising house prices.

Get ready for this one. Settled in? Here goes. Also from ABC News:

Doubling the grant offered to people buying their first home in regional Victoria will help push house prices down, Premier Danial Andrews says.

From July 1, the First Home Owner Grant will double to $20,000 for new homes valued up to $750,000.

It does not apply for established homes.

[Crickets]

[Audible sigh]

[More crickets]

We have a tiny feeling we’ve seen this story somewhere before. That’s right, we have — for the past 20 years in Australia.

Whenever there is a flare-up in talk about housing affordability, state governments revert to their tried, tested, and failed solution to improving affordability — they increase the first home buyers’ grant, therefore ensuring further house price rises.

Of course, Premier Andrews begs to differ. His response to the naysayers:

If you are building more houses because there are more people able to purchase them, you add to the total supply. If you’re adding to the total supply of houses that puts downward pressure on houses.

Wonderful. We could give the loveable jug-eared fellow a big hug.

Just one point. As well as increasing the supply of houses, as Premier Andrews admits, it also increases the demand.

Ergo, all else being equal, our neat supply and demand curve stays where it is at best, and at worst, the crossover point moves up and to the right (from A to B on our chart below) — meaning higher house prices.



chart image


And what joyousness this must bring to the budding young (or not-so-young) first home buyer. The prospect of perhaps a $700,000 mortgage in the Victorian wilderness.

Of course, the majority, we’d think, will settle for more modest accommodation. And the government grant will most surely help.

But, will it help one jot to lower house prices? No, of course not. This time next year, Victoria’s regional housing ‘crisis’ will no doubt be even worse.

Their solution then: double the grant again!

Hurrah!

Which way for Snap?

Talking of doubling, the latest hot IPO (initial public offering) to hit the US market is Snap Inc [NYSE:SNAP].

If you are of the social media persuasion, you’ll know that Snap Inc owns and operates the popular SnapChat mobile application (or ‘app’ as the kids are wont to call it).

It listed last night in New York. And while it didn’t double on its first day of trade, it’s almost half-way to doing so, up 44%.



chart image

Source: Bloomberg
Click to enlarge


We can confirm that the chart does in fact show a 44% gain. Due to the small amount of data and price history (one day) for the stock, it’s hard right now to figure out where the long term trend may lay…

…except for up, given the current one-day trend. A momentum investor would be all over this stock.

The trend may very well be up. And its current market capitalisation of US$28.3 billion may most certainly be fully justified.

But where would this eletter be if there wasn’t someone to put the ‘poop’ into party pooper?

In 2016, Snap Inc recorded US$404.5 mln of revenue. It also recorded US$514.6 mln in losses.

We have no doubt about the app’s popularity among its users. We do have doubts about its ability to monetise those users by making them spend money directly with Snap Inc, or by being kind enough to allow advertising to invade the app.

As we see it, Snap Inc has two paths. It can be a success like Facebook Inc [NASDAQ:FB], which last year generated US$27.6 billion in revenue, a more than 50% increase on the previous year, and US$10.2 billion in profits — a 200% increase on the previous year.

Or it can be a monumental financial failure like Twitter Inc [NASDAQ:TWTR], which last year generated US$2.5 billion in revenue, barely 10% above the previous year, and saw losses of US$456.9 mln, which was only a slight improvement on the previous year’s loss.

Of interest, Twitter’s market cap is US$11.4 billion, half that of Snap Inc. of further interest, Facebook’s market cap is US$395.2 billion.

If we were an expert in this particular area of the market, we would say short sell Snap Inc now. A 50% gain is surely on the cards when the market realises cash is disappearing from the company quicker than one of its app’s instant messages.

Cheers,
Kris