Not worth the price of a box of cereal

  • Not all are haters
  • A most unorthodox service
  • Big turkeys
  • Good or bad?
  • Selling the fact

From Bloomberg:

Fairfax Media Ltd. was poised for its biggest one-day decline since 2008 after private-equity suitors including TPG Capital failed to submit binding offers and the publisher said it would push ahead with a planned listing of its property advertising portal.

We can’t say we’re surprised, because we’re not.

We said from the start that we couldn’t believe the Age and Sydney Morning Herald mastheads were worth more than the price of a box of cereal.

Our bet is that the private equity firms have come to the same or similar conclusion.

As for the listing of the Domain property listing business, maybe that’s a good idea. But to analogise it, it appears to us that Fairfax Media Ltd [ASX:FXJ] is behaving like a stranded sailor in a sinking lifeboat, who has decided to start throwing all his provisions in the water.

Getting rid of ballast may slow the sinking, but it won’t stop it. And even if it did, he’d soon starve anyway due to the lack of food.

Anyway, we’ll see. But if we had to put money anywhere, it would be on Fairfax following that other ‘old media’ business, Ten Network Holdings Ltd [ASX:TEN], into administration within the next 12 months.

The newspaper business is a truly terrible business to be in.


Overnight, the Dow Jones Industrial Average closed up 129.64 points, or 0.61%.

The S&P 500 gained 5.6 points, or 0.23%.

In Europe, the Euro Stoxx 50 index ended the day up 49.93 points, or 1.45%. Meanwhile, the FTSE 100 gained 0.88%, and Germany’s DAX index gained 1.22%.

In Asian markets, Japan’s Nikkei 225 index is currently down 11.88 points, or 0.06%. China’s CSI 300 is down 0.95%.

In Australia, the S&P/ASX 200 is up 90.41 points, or 1.59%.

On the commodities markets, West Texas Intermediate crude oil is US$46.82 per barrel. Brent crude is US$49.40 per barrel.

Gold is trading for US$1,224.61 (AU$1,607.52) per troy ounce. Silver is US$16.14 (AU$21.19) per troy ounce.

The Aussie dollar is worth 76.17 US cents.

Not all are haters

Clearly Morgan Stanley’s analysts have a better opinion of the worth of Fairfax than your editor. As the following chart shows, Morgan Stanley yesterday affirmed its price target (yellow line) of $1.50.

chart image

Source: Bloomberg
Click to enlarge

Current price (white line) — 98 cents.

A most unorthodox service

Something radical is coming. It’s coming to your inbox tomorrow afternoon, around noon.

It’s the biggest, most extraordinary, most unorthodox thing we’ve ever done.

It’s a new investment advisory. But it’s not like any of our other investment advisories.

It’s not like our small-cap service. It’s not like our cycles and trends service. It’s not like our income or macro service.

It’s something completely different.

It’s so different that, as far as we can tell, there’s nothing else like it in Australia. In fact, as far as we can tell, there’s nothing else like it anywhere in the world.

That’s what I call unique.

What’s it all about? One word: cryptocurrencies.

I can hear you now, ‘You’re jumping on the bandwagon’. Maybe. But I don’t think so. Colleague, Sam Volkering, has banged on for years, to anyone who’ll listen, about cryptocurrencies — including Bitcoin.

But what Sam sees out there now excites him, and worries him. He’s excited by the opportunity of crypto, and its rapid development in recent years.

But, he’s also worried by the complete lack of knowledge that most people have when it comes to cryptos. He’s worried that folks are pouring into the crypto market without really understanding it.

He’s worried that some folks are just ignoring or dismissing it because they think that it’s one thing, when it’s really something else.

That’s why we’re launching a brand new crypto service. I’ll concede, I know very little about it, and understand even less. But even I can see why Sam is so excited about it…and the potential opportunity at hand.

Anyway, look out for details tomorrow. Check your email inbox around noon. It’s a radical new service. One that you shouldn’t ignore.

Big turkeys

As part of our recent business trip to Dublin, Ireland, we spent a few days in the UK. A ‘few’ was enough. One would have been better.

None would have been best.

To say that the country is slipping briskly into 1970s style socialism would be an understatement.

A report in today’s Financial Times provides more evidence:

Britain should extend the minimum wage to self-employed workers who do not control their rate of pay, such as many of those in the gig economy, as well as traditional sectors such as hairdressing, according to a think-tank.

This follows on from the decision in a UK employment tribunal last year that ruled in favour of Uber drivers. From the Independent:

Uber drivers are entitled to receive the National Minimum Wage and holiday pay because they are workers, not self-employed, a London employment tribunal has ruled.

Regardless of the merits, it seems to us that Uber drivers are turkeys who have just voted for Christmas.

One of the supposed benefits of the so-called ‘gig economy’ is that people get to choose their own hours. Also, the free market appeal of the ‘gig economy’ is that it’s free of the shackles and regulations of government. A comparison being Uber versus the taxi industry.

However, it seems that when those who embrace the idea of the ‘gig economy’ actually start working in the ‘gig economy’, they don’t like it. They want government interference and regulations, because they think it will help them.

The reality is likely to be the opposite. Once governments and bureaucrats get their claws in, there’s no letting go. Soon enough, any competitive and pricing advantage held by the ‘gig economy’ businesses erodes.

Ultimately, with no price differential, there is less incentive to use the previously lower-cost ‘gig economy’ service. That likely means less demand for Uber, which means fewer drivers.

The big disrupter is no more. Government wins. The free market loses. Drivers lose.

The turkeys vote for Christmas. They always do.

Good or bad?

Good news for Tesla Inc [NASDAQ:TSLA]. From the Financial Times:

Tesla chief executive Elon Musk finally looks set to overcome a history of over-promising and under-delivering on new car launches.

The first of his company’s all-important Model 3s — the car Mr Musk hopes will turn low-priced electric vehicles from worthy but range-challenged rides for do-gooders into an object of desire for the masses — are set to be delivered to customers on schedule later this month.

Bad news for Tesla. From the Wall Street Journal:

Auto sales continued to slide in June, as car buyers reacted to higher vehicle prices and Detroit backed away from dumping unwanted inventory into rental-car lots.

General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV reported steep monthly sales declines compared with the same period in 2016. While retail demand is losing steam, each of Detroit’s players also reported significant reductions in deliveries to daily-rental companies, long the Motor City’s biggest customers.

Of course, maybe it’s good news for Tesla. Maybe car sales are slowing due to the pent-up demand for Tesla’s Model 3.

Then again, maybe it spells trouble for Tesla. Once the Tesla fanboys have gotten through buying their cool accessory-on-wheels, we’ll see whether the marginal buyers are still in the mood to buy a US$35,000 electric car, when they could buy a good old Toyota Prius for nearly half that cost — around US$20,000.

Sure, it’s not the same. But to the marginal buyer, when faced with a 15 grand price difference, they may start to look the same. Prius wins.


Selling the fact

In related news, the Tesla share price fell US$8.99 in trading overnight.

chart image

Source: Bloomberg
Click to enlarge

The stock is now down 8% from its high.

As Tesla nears production and delivery of its first Model 3s, is this a case of investors buying the rumour, and selling the fact?

If so, further falls could be in the offing.

Naturally, we would take no pleasure in that at all. [Wink]