• Time to prepare
  • Masters of the cross-sell
  • Surprisingly small
  • Tulips resurrected?
  • More cryptos

I had that Andrew Lloyd-Webber in the back of my cab once…

And so began a wonderful 40-minute taxi ride from London City Airport to our hotel on the Strand.

The cabbie artfully switched and segued from one subject to the other. Seamless. There wasn’t a building, cyclist, pedestrian or vehicle that entered our cabbie’s view without it jogging his memory, to launch into another tale.

Pure joy.

I’ve never used an Uber. But I’m certain the experience (for better or worse) isn’t quite the same as using a London black cab.

On with the show…


Overnight, the Dow Jones Industrial Average closed down 12.74 points, or 0.06%.

The S&P 500 closed down 1.11 points, or 0.05%.

In Europe, the Euro Stoxx 50 index ended the day up 1.41 points, or 0.04%.

Meanwhile, the FTSE 100 fell 0.11%, and Germany’s DAX index rose 0.16%.

In Asian markets, Japan’s Nikkei 225 index is up 30.59 points, or 0.15%. China’s CSI 300 fell 0.39%.

In Australia, the S&P/ASX 200 is up 4.90 points, or 0.08%.

On the commodities markets, West Texas Intermediate crude oil is US$42.93 per barrel. Brent crude is US$45.42 per barrel.

Gold is trading for US$1,251.94 (AU$1,657.70) per troy ounce. Silver is US$16.62 (AU$22.01) per troy ounce.

The Aussie dollar is worth 75.53 US cents.

Time to prepare

Thank goodness for all that money printing eh?

Thank heavens for all the regulations and government meddling, right?

It all means the world will never face another financial meltdown…or…erm…what’s this from the Financial Times?

Warren Buffett has ridden to the rescue of Home Capital Group, Canada’s stricken subprime mortgage lender, producing a C$2.4bn financing package likely to ease immediate fears over its future.

Alrighty then.

Rome wasn’t built in a day. And the 2008 financial meltdown didn’t all happen in one day either.

In fact, from the beginning of the crisis in 2007, to the bottom of the market in 2009, the whole thing took about two years to play out.

It started small, and then grew, until it reached a crescendo.

The next crisis will start small. It will then grow. Before it too reaches a crescendo.

If you’re not prepared for it, you darn better start preparing for it. And soon, too.

So mark 20 July in your diary. If you want to know when the next financial collapse is coming, what will cause it, and how to deal with it, you must tune in to an upcoming special event.

We’re still working through the details. But within the next couple of weeks we’ll let you know how to get involved.

Masters of the cross-sell

Ooh, bad news for Domino’s Pizza Enterprises Ltd [ASX:DMP]. As reported by The Australian:

Domino’s is quickly learning that the investment community that cheered its stock to a high of just over $80 last year to give the pizza chain an astonishing market capitalisation of $7.1 billion can quickly turn into a merciless critic.

Shares in Domino’s slumped 4 per cent yesterday, to take its year-to-date retreat to just under 20 per cent and a long way from its dizzying highs in August last year, as another analyst released a stinging report on the retailer and said it would miss its sales and earnings targets, as well as slapping a sell on the stock.

A blistering 72-page takedown, the report by Citi analyst Craig Woolford titled “Hold the anchovies” is no laughing matter for Domino’s shareholders as the investment bank placed a $45.50 price target on the stock, well short of the closing price yesterday of $52.60 and the recent high of $80.69.

From our perspective, Domino’s is a terrific company. We see it as a cross between Subway and the early Ford Motor Company [NYSE:F] under Henry Ford — ‘You can have any size pizza base you want, as long as it’s a medium.’

And as for their cross-selling and up-selling, they put McDonald’s Corporation [NYSE:MCD] to shame. ‘Do you want a cheesy crust with that?’ ‘Do you want a bottle of Coke with that?’ ‘Do you want a chocolate fudge brownie with that?’

No wonder your editor is a good five kilos over our ideal weight. [Reader’s voice: Make that 10 kilos, fatty!]

But, the popularity of Subway has waned. Once customers realised that whatever you order, it all actually and oddly tastes pretty much the same. The popularity and growth prospects of Domino’s appear to have faded as well.

At its current price, Domino’s trades with a price-to-earnings ratio of 53-times. Last year, as the share price soared towards its peak, the PE was above 80-times.

Clearly, that’s unsustainable.

Although, tell that to Amazon.com Inc [NASDAQ:AMZN] investors. At today’s market price, it trades with a PE ratio of 187-times. Granted, thanks to increased earnings, that’s half of where it traded last year, when the PE was above 400-times earnings.

But back to Domino’s. The other issue for the company is that the market has changed. And we don’t just mean changing tastes. We mean that, thanks to online ordering websites such as Menulog, big companies like Domino’s have lost their edge.

Even five years ago, it was rare to find a Thai, Indian, or Chinese restaurant, or Fish & Chip shop that would offer online ordering for home delivery or takeaway. Now, it’s rare not to see those places paired up with Menulog or another online ordering service.

There’s little doubt that will have an impact.

That’s not to say that Domino’s is a business in terminal decline. Or that it’s some kind of pizza-pie-in-the-sky operation, without any real chance of making a profit. Yes, we’re looking at you again Tesla Inc [NASDAQ:TSLA].

Domino’s makes a profit. And it pays a dividend. However, with the company appearing to be at maturity, it strikes us that a transition from growth stock to income stock can’t be far off. And that means its current 1.4% dividend yield will have to rise.

How will that happen? One of two ways. Either the stock price falls so that it yields somewhere in the 3–5% range. Or the company will have to increase its payout ratio. Should it do so, that would confirm the growth era is over. The more of its profits that it pays out, the less cash the company has to reinvest in growth.

Surprisingly small

It’s hard to think of a hotter topic right now than bitcoin and cryptocurrencies. But just how big is the market?

HowMuch.net helps to put it in some perspective. Check out the following graphic:

chart image

Source: HowMuch.net
Click to enlarge

That’s bitcoin over on the right. It has a market capitalisation of US$41 billion.

Compare that to the ‘market cap’ of refined gold in existence, which is US$8.2 trillion — 200-times the price or value of bitcoin.

And as for the total amount of physical money in circulation worldwide, estimates are that it’s US$31 trillion. That’s around 756-times the current value of bitcoin in circulation.

Tulips resurrected?

Subscriber, Barry writes:

Why is not the cryptocoin not seen as the 21st century new tulip bulb? A lot of parallels here, actually they have less substance than a tulip bulb.

I think you will find this is just another fad (con) by some smooth operator and do not say that a government (country) backed currency has no backing.

Why are cryptocurrencies not a bubble? To be honest, your editor can’t say that they aren’t a bubble.

We have our concerns. But when one of our analysts comes to us, and he or she is convinced that the world is on the threshold of adopting a whole new currency system, we have to take notice.

But that doesn’t mean we rush to publish any old rubbish. I’d say that Sam Volkering has badgered me for at least four months for us to focus on cryptocurrencies. Eventually, I caved in. Not because I couldn’t take any more of his badgering! But because the more I listened to what he had to say, the more I became convinced that he could be on to something.

Did the simultaneously soaring bitcoin price have an effect on us too? That’s possible. I can’t deny it.

As I’ve said before, I still don’t completely get bitcoin or cryptocurrencies. But that doesn’t mean I should stand in the road of folks who do understand it, and who do want to learn more about the potentially incredible profit-making opportunities.

Providing you understand the risks, I heartily recommend you check out Sam’s latest report. The cryptocurrency market is going bonkers.

 Is it a bubble? Maybe.

Are there profit opportunities for the brave? It certainly looks that way.

Check it out here.

More cryptos

It’s one thing to give you potentially huge profit-making opportunities. It’s another to explain exactly how the crypto market works.

Sam provides an element of that here. But soon, we’ll reveal another crypto initiative. It’s in the works, and it’s like nothing we’ve ever done before. Stay tuned.