Honestly!

  • Don’t trust ‘em
  • Pot
  • Grade: Fail

We had a good laugh reading today’s Australian Financial Review as we were waiting for our coffee order this morning.

It was in relation to a story on Victoria’s new vacant property tax.

The AFR reports:

The tax, due to take effect from January next year, will apply to properties in Melbourne’s inner and middle suburbs and will be self-reporting — owners will be expected to inform the State Revenue Office when the tax becomes applicable. The policy follows Vancouver, which announced a vacancy tax in September last year.

Hah! Self-reporting, eh?

On Monday, we explained two simple ways that property owners could sidestep the new tax. Well, thanks to the self-reporting rule, it’s now become even easier.

Property owners don’t even need to come up with an excuse for why a property is empty…they just need to keep their mouths shut.

But wait a moment. Scuppered… The report notes: ‘A spokesman for Victorian Treasurer Tim Pallas said compliance could be checked against utility usage.

We’re sure the emphasis is on ‘could’. But, even so, there are ways around it. A vacant property valued at $700,000 would attract a tax of $7,000 per year.

The easy alternative is for property owners to arrange an electricity/water connection and install timers. Make sure the lights are on for two hours per day. Make sure the water system uses a set number of litres per month.

In fact, we can imagine a cottage industry emerging where folks (in return for a fee) will go to someone’s house twice a week and turn the tap on for 30 minutes.

What would that be worth to property owners? Faced with a $7,000 tax bill, they may be happy to pay $20 per week for someone to do that. Maybe a little more, depending on the value of the property.

When we first saw this story, we doubted that it would achieve either of the government’s two aims: to increase the housing supply and raise revenues.

After hearing the latest on this, we’re more convinced about that than ever. Chumps.

Markets

Overnight, the Dow Jones Industrial Average fell 29.58 points, or 0.14%.

The S&P 500 fell 6.92 points, for a 0.29% drop.

In Europe, the Euro Stoxx 50 index dropped 2.34 points, or 0.07%. Meanwhile, the FTSE 100 lost 0.15%, and Germany’s DAX index gained 0.06%.

In Asia, Japan’s Nikkei 225 index is down 107.94 points, or 0.56%. China’s CSI 300 is down 0.05%.

In Australia, the S&P/ASX 200 is down 6.39 points, or 0.11%.

On the commodities markets, West Texas Intermediate crude oil is US$52.82 per barrel. Brent crude is US$55.61 per barrel.

Gold is trading for US$1,218.98 (AU$1,602.91) per troy ounce. Silver is US$17.52 (AU$23.06) per troy ounce.

The Aussie dollar is worth 75.98 US cents.

Don’t trust ‘em

WikiLeaks has done it again. From the Financial Times:

The inner workings of the CIA’s cyber-espionage operations were at risk of being laid bare on Tuesday, after WikiLeaks published what it claimed was the first part of a large trove of documents detailing the US agency’s techniques for hacking into smartphones, internet-connected TVs and other devices.

Hang on a minute; weren’t we just told that US spy agencies need a warrant to do these things…and that they never spy on their own people?

Once more, it shows that you can’t trust governments with, or about, anything.

Pot

It’s the hottest story of the moment: medicinal marijuana (cannabis).

And it appears to be on its way to becoming a hot investment story too.

Check this, from Konbini.com:

When Colorado became the first of two states (along with Washington) to fully legalize recreational cannabis back in 2012, conservatives in federal and local government, as well as other critics, warned of an impending social and cultural disaster if “the devil’s lettuce” were to be introduced into mainstream society.

But anti-prohibitionists have long maintained that if legalized and heavily regulated, cannabis would bring about more positive change in our communities than negative.

According to the Colorado Department of Revenue, dispensaries in the state sold $1.3 billion in medical and recreational cannabis last year, generating almost $200 million in tax revenue for the state.

Since 2014 (the first year that cannabis sales were legal in Colorado), when the state raked in $699 million in cannabis sales, the industry has nearly doubled in revenue.

Nationally, it’s estimated that Americans spent over $53 billion on cannabis in 2016, with most of that being funnelled into illegal black markets. That’s why many activists are calling for federal regulation of cannabis: not only for the tax revenue, but for safety concerns.

Two things. First, ‘devil’s lettuce’! That’s a new one for us.

Second, US$53 billion. That’s AU$70 billion.

To be honest, that number is staggering. We’re not 100% sure that we believe it. But even if the number is exaggerated by double, it’s still big.

As a point of comparison, in 2016, Coca-Cola Company’s [NYSE:KO] global sales were US$41.8 billion.

British American Tobacco plc’s [LON:BATS] global sales in 2016 topped £14.7 billion.

And BHP Billiton Ltd’s [ASX:BHP] annual sales for 2016 came in at US$30.9 billion.

So for Americans to spend US$53 billion on marijuana is extraordinary.

It shows you the potential size of the market…a market that still hasn’t been fully exploited. This is why colleague Sam Volkering is on the case.

He figures it’s just about the best speculative investment opportunity he’s seen in years — maybe even better than some of the exciting tech stories that flash across his screen.

Here’s what Sam says in his recently-released report on marijuana:

Canberra is paving the way for legal marijuana.

On 23 February, the Federal Government announced a series of initiatives to facilitate faster access to medical cannabis.

This includes an eight week plan to build a store of imported medical marijuana products, while they work to establish domestic cultivation.

And this is the development I believe could make a big, life-changing difference to your net-worth this year and beyond.

Right now the Government is deciding who gets the coveted licenses to grow, cultivate and sell medicinal cannabis in the Aussie market.

Their decision could arrive at any point in the next few weeks, and send one stock in particular soaring.

I believe I’ve uncovered the predominant stock to benefit from this landmark announcement.

Check it out…but only if you’re a wide-eyed speculator. This story is hot. Details here.

Grade: Fail

Finally, from The Sydney Morning Herald:

Students at the failed Sage Institute of Fitness have been told they must pay “outstanding fees” before they can receive certificates that will enable them to continue their suspended studies elsewhere.

Sage announced on Tuesday that it would cease to trade in Sydney and Brisbane — and suspend classes in Melbourne for a week — after administrators failed to find a buyer.

Hmmm, education. Isn’t this supposed to be part of Australia’s grand plan to diversify away from a resources-led economy?

We think so. How’s that planning going so far?

Of course, the biggest issue here is that the increase in the number of vocational institutes is another example of the government encouraging a misallocation of resources.

It’s the obsession with education…or rather, over-education. Instead of leaving school and university in order to get a job, the message is that people should take up another course instead.

You may remember the ridiculous, and completely arbitrary, higher education target established by the Rudd-Gillard governments, which set a target for 60% of school leavers to go to university.

Our response to that was incredulity. After that, we pondered, what if only 58% of students want to go to university? Would the government force the remaining 2% to go against their will? How would they select that extra 2%?

Or more likely, how much in wasted government spending would go towards achieving that target when, in reality, for the marginal student, attending university won’t matter a jot for their career prospects?

Anyway, the growth of businesses like Sage is indicative of this misallocation of resources (not to mention time and money), when many students would likely benefit more from going straight into the workforce.

Cheers,
Kris