Beth Kindig is well worth reading

During my research I came across articles written by Beth Kindig. You can find her work at https://beth.technology in full now that Seeking Alpha are making things difficult to read without a subscription.
You should read her views on why Apple is unlikely to manufacture cars – why the Roku user base is likely to continue its relentless expansion – and why Spotify could turn out to be a disappointing investment at recent valuation.
She also gives the reasons why Samsung’s Smart TV offering is such a miserable failure. Just as well that I never got round to replacing my 2006 Samsung in the U.K. which still gives an excellent picture – I will wait for Roku.

What is going on with cable and satellite ?

I don’t follow Comcast, and I doubt that I will in the future. But the cash bid for Sky of around USD40 billion is interesting. Bearing in mind the growth of Roku, the deal looks to me like the old guard of cable and satellite combining to see what they can make of existing subscriber and relationship numbers. What is also interesting is that Rupert Murdoch’s interests are effectively cashing in their satellite interests in a Europe – they did offer 1075p per Sky share a few years
but have recently contracted to sell 21st Century Fox to Disney and were underbidders for Sky acting as agents for Disney. Sky is sold to Comcast at 1728p per share.
As far as I can see, Comcast’s subscriber numbers of circa 22 million have been falling, and Sky’s 23 million household connections have been slowly rising. Both companies also spin out meaningless figures for numbers of relationships.
My first thought is that Comcast’s debt will rose from around USD59 billion to USD99 billion, not ideal if the business starts to shrink. My second thought is that looking after so many extra customers gives management the opportunity to rearrange their compensation before the numbers worsen and 5G becomes the norm. My third thought is that Murdoch interests have in general been keen to invest in new media areas. They even tried to compete with Facebook, not such a bad idea at the time. So if new media moves away from cable and satellite towards companies like Roku, they will have enough cash and experience to become involved.

An update on stocks mentioned here

Nio has been the most volatile of the bunch. The issue came at USD 6.5 on 12th September and there was a limited chance to get in lower that day, before the price rocketed on the next day. Now at 8.59.
Roku were 56.07 on 18th August – now they are 72.45 and there has been no news of any importance.
The 5G stocks are unchanged to lower since 18th August. Verizon down from 54.79 to 54.42 and Vodafone ADRs up from 22.78 to 22.81 are both high yielders, but neither have gone XD.
Ceragon is lower at 2.95 compared to 3.37. Have not seen any significant news – trivia is that an American comedy called The Oath is being publicised, and Verizon is the proud owner of Oath Inc !

Bitcoin and other cryptocurrencies

While I understand that the real value of an equity might be very different to market valuation at any point in time, I could never quite understand how people valued Bitcoin and other Cryptocurrencies which have no underlying value at all.
There has been a lot of comment about the blockchain and I can see how this can be of commercial use. However, a blockchain currency – say a token worth one US dollar – would need to be underwritten by a central bank, or group of central banks. In this way risk could be removed from commercial deposits which are largely uninsured at present. This risk free token money would be used to trade – say if an airport wanted to order more jet fuel – or if a government needed to order more pharmaceutical products.
All the costs associated with trading could also be paid for with token money, and defined user groups e.g. oil, Pharma would be able to hold their cash in this way. To compensate the central banks for overseeing the scheme, and to ensure that companies were not just holding cash there, a negative interest rate could be applied on a progressive scale.

Thinking about Career Politicians

I was thinking that Donald Trump, who is portrayed as a nasty character in parts of the MSM, has been doing a reasonable job getting the US economy moving. Many of his predecessors were career politicians through and through, whereas he has been running a number of businesses for a long time – sometimes well – sometimes badly.

Career politicians can certainly talk the talk and inspire people, just like the tribunes who the Romans sensibly kept somewhere near the bottom of the ladder until higher offices were earned. But their decisions are often flawed and influenced by others. So you are left wondering who actually achieved anything much !

Eisenhower, a career soldier, gave America military roads – freeways – that greatly helped the economy. Don’t forget that when a Japanese invasion was a fear, the US military were not at all sure whether they could counter attack until the enemy had crossed most of the country. Military roads changed all of that, just as their inventors in Germany intended. JFK gets good press, but the so-called Domino Theory that his advisers posited resulted in an unnecessary war in Vietnam. Obama may be remembered primarily for trying to improve medical care, but a lot of what he achieved may be undone. Paul Ryan seems like an escapee from House of Cards – as untrustworthy as they come.

Moving to Britain, we have had a plague of career politicians. Tony Blair depended on his wife’s income as a leading lawyer, as did Nick Clegg. Both Clegg and David Cameron had some media experience in their short working lives. Theresa May worked at the Bank of England and an organisation that oversaw cheque payments – the most boring places imaginable and incredibly “safe” jobs at the time, before politics. No wonder the Brexit negotiations are in such a state.

Aramco is not listing anytime soon

Sounds as though a “Magnificent Century” intrigue has derailed the listing of Aramco, the multi trillion Saudi oil major. I understand that teams of corporate financiers and analysts have been quietly moving on since June, and the party line is that the Saudis could not agree amongst themselves about where to get their primary listing.
My own suggestion would be to list in China, where beheadings, floggings, and stonings would not cause an uproar – the Chinese prefer to shoot dissidents and have other nasty punishments. So a Chinese listing with ADRs on NYSE and EDRs on London and European exchanges seems the right way to go.
As the listing was alleged to value Aramco at between 20 and 40 trillion dollars, and the initial float would have been upwards of a trillion, this is good news for the listed oil majors’ share prices. The rationale is that passive funds and closet indexers will no longer have to sell shedloads of BP, Shell, and Exxon to find the cash to buy Aramco, even if they need to sell other stuff later to rebalance.

Nio

I see that Shanghai based electric car manufacturer Nio filed for a listing on the NYSE this month, and this will be quite a large offering bearing in mind that shipping only just started in June on its ES8 seven passenger SUV. Nio means Blue Sky Coming and is one of the recent Chinese EV startups (there are now over 500 of these). Maybe the cash generated from the IPO will enable the company to give Tesla a run for its money, but we must not forget that all the biggest car manufacturers now have electric car products under development too.

AI,FAANG,and MANIA

In the past investment professionals and writers used short phrases like “Senior Sisters of Growth” to refer to a small group of growth stocks. Now they use acronyms like FAANG and MANIA.
I was interested to see which of these companies is liked by Artificial Intelligence at the present time, so used the AIEQ daily portfolio to get some answers as of today.
The largest portfolio holding is Alphabet (Google) with 3.42%,
the fifth largest is Amazon with 1.96%, while Facebook and Apple are both way down the list at 1.43% and 1.36% respectively. So that is Watson’s view today, but this may change quickly. The two things that I most like about the AIEQ portfolio are the lack of “conviction” stocks and the ability to see exactly what they hold today.
Conviction stocks can make or break conventional portfolio managers, especially when “safe” investments crash and burn – a regular occurrence these days. GE recently cratered, and major oils can also bring unexpected event risk – look at what happened to BP a few years ago.
Downloadable updated portfolios are also an attractive feature of many exchange traded funds, as they provide a useful insight into stock selection. For example, if you are checking income stocks there is a Schwab ETF – SCHD – that is worth researching to see what they hold.

Marijuana and the Juul

I have been reading about the legalisation of marijuana in the U.S. with some interest, as some of the investment tip sheets have been promoting the shares of growers. My main concern is the availability of guns to people smoking pot, especially if they are in the group who are more likely to develop mental illness such as schizophrenia. So I think that this is an area where investment is best left to others.In addition to this,I just read an interesting post pointing out that corn rose from 4 dollars a bushel in 2010 to eight dollars in 2013, and is now back down to four dollars – the reason was farmers planting more corn after ethanol production drove the price higher. Apparently the pot market is already oversupplied and prices have fallen substantially.
Also reading about the Juul – which has grabbed a sizeable market share of the e-cigarette market according to Nielsen.
Juul Labs is at present a small unquoted business, but has raised substantial funding in unquoted convertible notes. It is interesting because the other big players are mostly “big tobacco” companies like BAT. The Juul looks like a long memory stick and works discretely – unlike some of the steam engines – so I can see that it will appeal to the millennials. Should be big enough to get a market listing soon.

5G

Small flat boxes are beginning to appear on lamp posts and utility poles in many places right now. This is in preparation for 5G – which will take us further into the future of the internet of things by providing for huge increases in mobile data traffic as well as very significant increases in both mobile internet and residential broadband speeds. I think this will be bad news for cable and satellite subscriptions, so these categories are best left alone.
Verizon seems the most interesting large participant as it is positioned to deliver both mobile and residential 5G services.
Smaller Vodafone foolishly sold its 45% stake in Verizon’s cellphone business some years ago – this was the best thing that they owned at the time – and the only winners from this appear to be the large pension funds who kept their Verizon shares offered as part of the deal (U.K. pension funds have favourable treatment under the double tax agreement with the U.S.)Nevertheless they should also benefit from 5G unless management find a way to trash this opportunity too.
Smaller companies involved in 5G include Ceragon Networks who are a wireless backhaul company. They provide the means to connect the flat boxes to cell towers and operators networks, and no doubt they have a few government contracts too in this age of covert surveillance.