Investment

#SpareMe & #ThankYou

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They say pictures speak a thousand words. One wonders whether there are a thousand threads in these pictures at the Cannes Film Festival. For all of the sanctimony we hear from celebrities about how important the #MeToo movement is, what better opportunity to let down the side than to minimize cloth to skin ratios. These ladies know they are walking billboards, overtly flaunting their assets to gain attention in the hope they are short listed on the next blockbuster given the likelihood of widespread media coverage. Why else would they wear the equivalent of postage stamps held together by dental floss? Who can blame them? Where are the male actors strutting in sequin g-strings? Hardly fair that only women get to show off the flesh!

By all means, these ladies who graze on lentils and alfalfa while completing grueling gym sessions 6 hours a day, have every right to dress as they please given they work so hard cultivating those figures. Isn’t objectification the intention? Appreciating beauty is certainly not a crime and it does not border on harassment. Should red-blooded males be shamed for seeing protruding nipples and exposed cleavage fall into their peripheral vision? Can we honestly say hand on heart that some in the Hollywood set didn’t/don’t willingly trade flesh for a $5mn role? It is not to condone the behavior rather to say that if in the end a budding actor/actress is willing to ‘pay in kind’ to nail a big role that is still consensual. Jokes about Weinstein’s sexual antics were made for years at award ceremonies before he was finally outed. If he is convicted of sexual assault/harassment then may the full extent of the law deal with the crime. However #SpareMe the sanctimony about how none of them knew. Staying on the lucrative gravy train and buying more global property was more way addictive than doing the right thing by standing up for the true victims.

It is surprising that the feminists haven’t been up in arms about Cannes. They managed to take down the F-1 grid girls effectively enough. Isn’t it ironic that the people most upset by the ban were the grid girls themselves. They liked what they did, got paid handsomely to flaunt figures they no doubt work so hard to maintain and welcomed the attention. Now they are out of a job! Yet it’s is we who must get in step with the times. Perhaps the F-1 teams could have been asked to pay a grid-girl tax and donate the funds to promote charitable causes that the girls themselves felt passionately about. It will be interesting to see whether the MotoGP franchise owners, Dorna, go the same route as F-1 which will be pretty hypocritical given the web pages dedicated to the brolley dollies at each round.

Maybe the bigger laugh was the Israeli 2018 Eurovision song winner, Netti Barzilai. She said that in the auditioning process that she overheard whispers about whether they could field someone prettier or skinnier. So sex appeal was preferable to ability? When was the last time we truly heard a properly decent song that didn’t have some singer surrounded by scantily clad women twerking?

Still the virtue signaling continues. Cate Blanchett was on the stairs at Cannes demanding equal pay, when she herself is one of the higher paid actresses in town. Her mate Benedict Cumberbatch is refusing to star in movies unless there is equal pay.  Such actions are nothing but self-indulgent attempts to create free publicity. Say he is offered $25mn for a role and his never seen before female sidekick is not granted the same? Will he protest, divide his own pot or star anyway? One wonders.

Here is an idea for celebrities. CM thinks that Hollywood should be run by a government agency which will ensure equality in all outcomes. Movie roles will be distributed evenly. Each movie will have exactly the same budget. It will have equal numbers of men, women, LGBT, races, religious representation and sexual orientation regardless of how factually incorrect a true story may seem. Movie directors will have no say in who is cast for each part. Box office revenues will be evenly distributed at the end of each calendar year to ensure that flops will get subsidized by the hits. The actors who star in blockbusters will receive exactly the same outcome as those whose films end up almost immediately on Netflix.

All actors and actresses will be required to work exactly the same hours, have the same contract terms and be required to attend the awards ceremony in exactly the same garb. No makeup will be permissible, no eyebrow stylists flown around the world at last minute and no speech longer than 10 seconds. As there is to be equality at all costs, there will no longer be gender based awards at the Oscars. Or alternatively Best Actor – male, female and the 63 other gender categories. “The winner of the Best Actor in the hermaphrodite category is….”

So Benedict and Cate, will you join a union which levels the playing field and calls for equality or do you still prefer that your acting skills determine how the free market sets your prices? If you choose the former, just don’t speak to Jack Nicholson. He is still collecting royalties from Batman. Just what I thought.

These are the Oscar stats. A 40% decline over 5 years. Is this a sign of a format that is no longer sustainable? Is the disintermediation/disruption caused by video on demand such that making a ‘date’ to go to the cinema is no longer a priority? Cinema attendance in the domestic US market is back at 1993 levels. In the 1990s Hollywood made 400-500 films annually. It now pumps out more than 700. The average revenue per film continues to head south. The strategy seems to throw more at audiences and hope it sticks. Are the movies the industry rates itself on actually reflected in the box office? Out of touch with the audience? It would seem so. 9 films in the last 13 have failed to breach $75mn. So instead of Hollywood being so preoccupied with espousing politics, perhaps it should look to the audience it ‘preaches’ to and starts ‘reaching’ them instead otherwise many of them will be staring at massive pay cuts. Or will that mean it is every man and woman for themselves again!?

Singapore Airlines wins whichever way the peace talks go

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June 12. Kim & Trump meet in Singapore. How the North Korean dictator will look in utter awe at how a city state of 5.6mn can build such a vibrant and prosperous economy with no resources of any kind other than grit, perseverance and common sense pro-business policy. The splendor of the skyline, architecture and cleanliness. Singapore will also get billions of people tuned in to the hours of global press coverage and news reruns. Surely Anderson Cooper will prop in front of the Merlion or Marina Bay Sands to convey the live coverage. How can Singapore Airlines not win from this global media freebie for tourism. One would imagine the place they sit down and talk will become a cult fixture for people to say they went to the spot where history was made.

Yet Singapore didn’t win the contest as a fluke. It has shown itself to be the outstanding beacon of independence in the region. Mongolia was a long shot and Switzerland would have caused poor old Kim to take a fuel stop. Let’s hope we get a peaceful resolution and maybe then we see Trump’s approval rating surge beyond the latest reading of 51% (Rasmussen). Ignore the noise around the midterms in Nov 2018. Iran is a separate issue and scrapping that deal was an election promise.

ABC goes bananas but slips up on cold truths that split the narrative

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On March 18,  CM wrote about the gross inefficiencies at the ABC, which have rapidly deteriorated over time. We said,

Since 2008, the average salary of ABC’s staff has risen 25% from $86,908 to $108,408. Total staff numbers have risen from 4499 to 4769. Therefore salaries as a percentage of the ABC revenues have risen from 37.1% of the budget to 50%. The ABC’s ability to generate sales from content has fallen from A$140mn to A$70mn last year. The multicultural SBS has seen its budget grow from A$259mn in 2008 to A$412mn in 2017. SBS staff numbers have grown from 844 to 1,466 over the same period with average salaries rising from A$82,689 to A$88,267 or 7.2%. Which begs the question why is the SBS able to operate at 31% of the budget in salaries while the ABC is at 50%? Surely the ABC’s economies of scale should work in its favour? Clearly not.

According to The Australian, in response to the budget cuts coming over the following three years,  the ABC responded today with,

The ABC says there is “no more fat to cut” following the federal government’s announcement to slash $84 million in funding from the public broadcaster…News director Gaven Morris has hit back at the three-year funding freeze announced in Tuesday’s federal budget, which maintains more than $1 billion a year for the broadcaster.

“Make no mistake, there is no more fat to cut at the ABC. Any more cuts to the ABC cut into the muscle of the organisation…We’re as efficient as we’ve ever been…We’re the most minutely scrutinised media organisation in Australia…$84 million over three years, there is simply no way we can achieve that without looking at content creation and certainly looking at jobs within the organisation.”

Well perhaps if the ABC stop airing radical feminists who demand that parents seek approval from their babies when changing nappies or called conservative politicians who served in the military as “c*nts” perhaps it might justify for more budget.

It is a pretty simple. Online media pretty much allows such a wide array of choice that we do not need a taxpayer funded media (which readily breaches its code of conduct with regards to political bias) to provide so much content.

We have multiple ABC TV & radio stations plus multiple websites. One could argue for one each. We certainly do not need to give the ABC more money to expand its platforms to make up for a shortfall in quality content to arrest declining market shares.

If only Elon Musk could summon institutional questions

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Elon Musk has apparently terminated the question of a Bernstein analyst ((followed by the rest of the institutional queue) on the basis of it being “uncool”. He said, “We’re going to YouTube [for retail investors]. These questions are so dry. They’re killing me!” If only the Tesla CEO could summon the right type of questions that deflected criticism of the company as easily as maneuvering a parked Model S from a tight parking spot.

While he urged non-believers to sell the stock, there is little to be gained pushing a line of  opacity for a company with production issues, continuing losses and $10.6bn in debt. Earnings results are not about having fun but for investors/analysts to probe and qualify assumptions in the interest of making rational investment decisions.

CM has made constant reference to Musk’s amazing ability to sell. He is coming up to the pointy end of having to deliver. There are countless distractions which perculate below the surface – copyright infringement trial launched by Nikola Motor, the NTSB autopilot probe, countless resignations and recent calls to cut the staff canteen cookies. By blowing off the main investor pool that feeds him, the question of CEO capability becomes a bigger factor than the dreadful earnings themselves.

There is no better disinfectant than sunlight but Musk continues to deflect. Cash flow continues to decline  The production shutdown in April will thump Q2 earnings, not to mention the capex spend should rise plus the write off of equipment that has proven to be surplus to requirements. Here he is talking of 10,000 units a week down the line to fill the hearts of the faithful followers. Perhaps his comments about not needing to raise capital are best addressed by the fact he’s raised 7x since that statement.

Today’s results meeting is more telling in that snake oil salesman tactics of talking up the situation was replaced by silence and stonewalling. Telling.

If you ever wanted proof of Australia’s stupid energy policy look no further

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Here is a cracker from Jo Nova on proof of how retarded the thinking is with our federal and state governments when it comes to energy policy. The free market makes a compelling case for taking the opposite view of the regulators. The real danger is if more businesses move off the grid (like the Chinese Bitcoin miners) to their own affordable power the cost of electricity to the “rest of us” will soar. It doesn’t take a rocket scientist to work that out. Joe and Joanne Public will be forced to rely on an already unstable energy source with fewer people to cover ever rising network costs. As long as we look as we are doing something about climate change, that will be enough. Nuts!

Who will get the Nobel Peace Prize for helping end the Korean War – Kim, Moon & Xi or Trump?

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Will President Donald Trump be awarded the Nobel Peace Prize for getting Kim & Moon to the peace table? It is unlikely in so far as the Norwegian Nobel Committee would fear the full weight of international opinion (aka mainstream media) for doing so. Surely they wouldn’t risk making a mockery of such a coveted award? Then again a one Barack Obama was handed one less than 9 months into his first term on the stated basis of a noble quest for the Holy Grail of world peace rather than anything actually achieved. In 2016 alone, the Obama administration dropped 26,171 bombs on enemies. Not bad for a serial appeaser. A Nobel prize has even been awarded to a multi billion dollar embezzling terrorist of a self appointed authority, so Kim Jong-un is in with a shot.

Will Trump receive any credit (even without a Nobel) for pushing ‘Rocketman/The Fat Kid’ to the negotiating table? Probably not. How come no other administrations were able to achieve something that was relatively easier when the state of the North’s arsenal was considerably less lethal? Kim threatened Guam less than half a year ago. Trump didn’t back down and the North Korean dictator clearly realized from Twitter that the most powerful man in the world wasn’t all bluster. President Xi may well have played a solid hand in pushing Kim to sue for peace negotiations. In the interests of President-for-life Xi, his foe Trump has a maximum 7 years left to meddle. If Korea gets a peace deal, Xi can play hardball on the peninsula if a softer President enters the White House thereafter. Then he can take a stab at Taiwan. Xi can afford to wait.

We should not forget that Kim Jong-Un travelled to China on his first ‘overseas’ visit earlier this year. Best get the approval of a real dictator before progressing. Kim was there to get Beijing’s blessing to ensure North Korean sovereignty come what may so as to maintain the desired geographical buffer to pro-US nations.

Noone said peace isn’t desirable. The question is what price must one pay to get it? There are too many incidents in the past where signing peace treaties with dictatorial regimes have ended in disaster. Hitler/Chamberlain (Munich Agreement), Hitler/Stalin (Pact of Steel), Putin/Merkel/Macron (suggestion of UN in Ukraine), Le Duc Tho/Kissinger (Paris Peace Accords over Vietnam), Xerxes II/Leonidas (Greece) etc.

Will part of the denuclearization ‘deal’ call upon a withdrawal of US Forces from the Korean Peninsula? Would the US go for that? Highly unlikely. Would Moon be so gullible as to suggest a (slow) withdrawal? Of course he has the right to demand a foreign garrison pack up and go home. Trump may have pushed China and NK to act but he’d prefer the status quo than to roll over and vacate the premises. China wins in either scenario. America certainly doesn’t want to pay for the same real estate twice. Some quarters in South Korea must surely want the US military to stay as an insurance policy. Afterall how can one trust someone who comes from a dynasty that kills its own people and assassinates family members? Worryingly Moon looks to have a certain ring of Chamberlain about him.

It was clear that North Korea was dictating the moves at the Winter Olympics. It was South Korea who funded the $3mn in travel costs for the cheer squad. Anything that looked to mock the North Koreans was swiftly dealt with. It spoke volumes about which Korea was calling the shots. Anyone impersonating any other world leader could do so with reckless aplomb. Anything resembling Kim Jong-un  was quickly removed from sight. Tyrannies rarely do humour and sadly not enough democracies defend it. Still it is hardly an encouraging sign for even handed peace talks when one side looks to appease in this way.

Kim Jong-un is smart enough to realize at such a youthful stage in his life that he probably has another 40-50 years left in him. Reunification only works if he is given sanctuary. Idi Amin saw the beauty of a life in exile in Saudi Arabia. If Kim Jong-un can relax in Sichuan Province it maybe a dignified way out. One can bet his ‘some are more equal than others’ inner sanctum would rather the two stay separated. They would stand to lose way more than Kim.  It would be ridiculous to assume that Kim could be a major cog driving a reunification process with such an abysmal human rights record. Name a despot who would willing cede authoritarian rule much less without a deal which would exonerate him from any international criminal court that he would be held accountable for under a functioning democracy?

The South Koreans have had a think tank in Berlin researching the effect of reunification in Germany. The former West is still heavily subsidizing the former East. Depopulation (-15% between 1989 & 2013), unemployment rates (higher today that 1989) and inferior GDP per capita (27% less) are all a feature of the former communist state vs the federal republic over the last three decades.

How easily could South Korea absorb the North? West Germany had a population of 63mn in 1989 vs 16mn in East Germany or 4:1. South Korea has 53mn vs North Korea’s 24mn or 2:1. West Germany had a 2.3x GDP/capita ratio to the East in 1989. South Korea has a 52x GDP/capita ratio to the North. Reunification for Korea isn’t an apples to apples comparison with Germany. While Samsung might relish the prospects of tapping a cheap labour pool to build washing machines, the South would likely face far higher integration costs than the Germans. Even 30 years ago East Germany had a GDP/capita 17x that of North Korea.

In any event the only sure outcome of peace on the Korea Peninsula is that President Trump will get next to zero credit in the media. Wailing about the reckless diplomacy of an unhinged dictator will be the main with a few conceding it was at best a fluke.

Harley-Davidson sales tank in Q1 2018

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Harley-Davidson announced Q1 figures which saw its US based unit sales (c 50% of group) fall 12% with global sales down 7.2% YoY. H-D is often regarded as a canary in the coal mine for discretionary spending. 30 day delinquencies continue to rise in Q1 2018 @ 3.31% the highest in 6 years. Harley wrote,

The U.S. 601+cc industry was down 11.1 percent in the first quarter compared to 2017. Harley-Davidson’s first quarter market share was 50.4 percent in the U.S. The 601+cc industry in Europe was down 7.3 percent in the first quarter compared to 2017.  Harley-Davidson’s first quarter market share was up 1.3 percentage points to 10.4 percent in Europe.”

Highlights:

Revenue up 2.7% despite 9.7% lower shipments

Gross margin 34.7%, down 1.0 pt.

SG&A up

Restructuring charge of $46.8 million

Operating margin of 12.7%, down 5.1 pts.

Harley reported 243,000 units in 2017 (-6.7% on 2016) and it is shooting for mid 230,000s for 2018. This despite some stunning new models. The problem with a divine franchise is that complacency kills. The competition is much fiercer and the prices of its bikes are for the better heeled who seem to be cooling them