Selloff? Not quite…

  • Experts eh!
  • Like Trump
  • The end of Ten
  • More than charts

From Bloomberg:

Asia-Pacific stocks advanced as the global selloff in technology shares showed signs of easing, while the pound held losses as Theresa May fought to survive the fallout from the British general election.

A ‘selloff’ eh?

We guess it is a selloff…but not much of one if we’re being honest.

The NASDAQ Composite index is only down 2.62% from its all-time record high (which it achieved in intra-day trade last Friday, as it happens).

Apple Inc [NASDAQ:AAPL], while it has fallen more, is down just 7.17% from its 15 May high. A selloff? Meh.

And Inc [NASDAQ:AMZN], another stock to have recently busted higher, has since fallen just 5.08% from its peak.

Yes, tech stocks have sold off…but they haven’t sold off. If you get our drift. That said, the sharp price falls aren’t insignificant. If we were to use the clichéd analogy of an earthquake, we’d contend that this selloff is merely a tremor prior to the much bigger quake.

As always, we’ll continue to observe with a keen interest…


Overnight, the Dow Jones Industrial Average fell 36.3 points, or 0.17%.

The S&P 500 fell 2.38 points, or 0.1%.

In Europe, the Euro Stoxx 50 index fell 42.12 points, or 1.17%. Meanwhile, the FTSE 100 lost 0.21%, and Germany’s DAX index fell 0.98%.

In Asian markets, Japan’s Nikkei 225 index is up two points, or 0.01%. China’s CSI 300 is up 0.15%.

In Australia, the S&P/ASX 200 index is up 64.9 points, or 1.14%.

On the commodities markets, West Texas Intermediate crude oil is US$46.25 per barrel. Brent crude is US$48.49 per barrel.

Gold is trading for US$1,266.47 (AU$1,676.04) per troy ounce. Silver is US$16.90 (AU$22.36) per troy ounce.

The Aussie dollar is worth 75.56 US cents.

Experts eh!

As for the Bloomberg report on the British election, it’s wonderful how clear things are with the benefit of hindsight.

No sooner had the results begun to show that the exit poll was right, than the experts began to expertly explain why the result had gone that way.

These were, of course, the same experts who had expertly explained prior to polling day why the result would go the opposite way.

Experts. Experts!

Like Trump

Jeremy Corbyn and his Labour Party didn’t win the UK general election. It’s worth remembering that when or if you read some of the post-election coverage.

However, the thing that caused the Labour Party to poll stronger than expected, was the same thing that caused Donald Trump to poll stronger than expected.

Sure, it wasn’t the same demographic. Trump supporters are generally older, and blue-collar workers. Jeremy Corbyn supporters are generally first-time voters, students, and young workers.

But more importantly than that, they both represent a demographic that feels it has been and is being overlooked by mainstream politicians.

So, does any of this matter?

On the surface, it may not seem so, given that these are electoral events that happened half a world away.

However, our hunch is that both of these events are an important part of a major financial and economic eruption that’s fast approaching.

Big words. Big claim. And not much evidence? Don’t be so sure about that. It fits in with something that has troubled your editor for some time.

Problem was, we didn’t know what to do about it. But now — or, rather, soon — we’ll have the answer.

It’s a project that in many ways has always been a part of our business, but which we could never express in a usefully actionable way.

That changes this July. I can’t say any more than that for now. But stay tuned. This is going to be big.

Now on to other matters…

The end of Ten

Bloomberg reports:

Ten Network Holdings Ltd., the broadcaster of Australia’s longest-running drama series “Neighbours,” faces tougher loan refinancing hurdles after billionaires Lachlan Murdoch and Bruce Gordon flagged they won’t continue their support for the company’s credit facilities.

Advisers for Murdoch and Gordon told Ten they don’t “intend to extend or increase their support” for the company’s loans beyond their current term, which ends Dec. 23, the network said in a stock exchange filing Tuesday.

The report goes on to rub salt into the network’s wounds, by reminding folks that in the heyday of Big Brother and its snaffling of the AFL grand final from Channel 7, Ten’s stock price was $23.62.

The stock last traded on Friday for 16 cents. The stock price has fallen an astonishing 99.32%:

chart image

Source: Bloomberg
Click to enlarge

Right now, it has a pitiful market capitalisation of just $59.1 million.

At that level, it’s mostly below the minimum market cap that Sam Volkering looks at for stocks entering his Australian Small-Cap Investigator buy list.

However, at $59.1 million, if it wasn’t such a terrible company, it could interest him at Microcap Trader. But it won’t. Sam’s only interested in innovators in Microcap Trader.

He certainly doesn’t want de-innovators — or whatever is the opposite of innovators — clogging up his exciting coterie of microcap stock picks.

But back to Ten Network Holdings. It’s a clear sign of how much the world’s economy has changed over the past 10 years, and how Ten Network Holdings has failed to keep pace with that change.

It’s not just Ten. Nine Entertainment Company Holdings Ltd [ASX:NEC] hasn’t exactly gone gangbusters for investors since it listed in 2013.

It’s down 35%:

chart image

Source: Bloomberg
Click to enlarge

Since 2013, Nine Entertainment’s revenues have stagnated. Pretty much zero growth. At least, unlike Ten, Nine Entertainment did eke out a healthy $324 million profit in 2016.

However, that may not flow into 2017, if the consensus of analysts surveyed by Bloomberg is any indication. The latest analytical ‘hot take’ forecasts Nine to lose $103 million when it reports its full year results in the next couple of months.

And like Ten, Nine has a stack of debt on its books too — over $300 million at the last half-year report. Debt that cost the company $6.5 million during that period. Not a great amount even for a profitable company. But an uncomfortable amount for a loss-making company.

So, what’s next for the major Aussie TV networks?

As far as can tell, nothing much has changed from when we started following the dramatic change in this sector about five or six years ago.

Back then, we said the old media, in the form of print and TV, was dying, and close to death. That continues to be the case. More and more people are accessing content online, in many cases direct from the source.

That’s certainly true when it comes to sports. TV series and movies haven’t followed the same path yet, but that will come. For now, streaming services such as Netflix Inc [NASDAQ:NFLX] and Stan act as the middleman, just like a TV network.

The only difference is that the content is available on demand.

That will change. and Netflix are both showing the way there. Their investment in original programming will soon make major content owners such as NBC, BBC, Universal, and Warner Brothers realise that they can sell ‘direct to the public’.

Why should the producers of a top-rated drama or comedy split revenue with a middleman when they can target the end-user directly?

It’s not as though broadcasters are unfamiliar with advertising. They know how it works. It’s just that they’ll need to advertise their own products to a wider audience, rather than having the middleman do it for them.

Once that happens, it will be the final proverbial nail in the coffin for the old network broadcasting model. When? Soon. Quite soon. That’s our bet.

More than charts

Most folks don’t realise it, but innovation and disruptive technology is one of the big themes behind controversial economist, Phillip J Anderson’s work at Cycles, Trends & Forecasts.

If you think cycles and trends is all about looking at charts…boy, are you wrong. To see why, go here.