In a recent SEC filing ahead of its split, Rupert Murdoch’s News Corp (NASDAQ:$NWS) revealed that its publishing arm had suffered a loss of $2.1 billion for its last reported fiscal year, which included a $1.3 billion write down of goodwill. Does that mean that even conservatives don’t buy what Fox News is selling anymore?The split, which should be completed by the middle of the current year, involves the separation of its publishing arm from the rest of the company. Dow Jones Editor-in-Chief and Managing Editor of the Wall Street Journal (WSJ) Robert Thomson will head the new company which will take the name of News Corp (his tenure has already begun from the start of the New Year). The entertainment arm, which includes 20th Century Fox and the Fox Network will be renamed the Fox Group. Rupert Murdoch will be the chairman of both of these companies and the CEO of Fox Group. What is significant here is that, at least technically, Rupert Murdoch will not have any operational role to play with the publishing side of his business empire.
A few weeks back, Walt Disney Co. (NYSE:$DIS) reported its fourth quarter results for its fiscal year ending 29th September 2012 with a 14% increase in profits to $1.24 billion coming from revenues of $10.8 billion. This took its annual profit to $5.7 billion, an 18% increase, and revenues of $42.3 billion, a 3% increase, over last year. However, the company barely met analyst’s estimates and gave a gloomy outlook as ESPN network, after witnessing declining viewership as Comcast’s (NASDAQ:$CMCSA) NBC broadcasted the Olympics, pumping an additional $1.2 billion in revenues, has not been able to re-assert its pricing pressure and faces negative advertising trends coupled with the falling ratings from ABC.
ESPN’s negative outlook is of particular concern as the sports giant contributed nearly 75% to Disney’s cable operating income. Its quarterly profits increased by 9.4% to $1.38 billion. While advertising remains fairly constant, the programming costs and competition in the industry is rising.
The Reformed Broker, Joshua Brown, gives a riveting and insightful interview about how the internet is changing the way people interact with the capital markets. Listen at the 6:10 mark for his comments about social media and how a '2 man shop of financial advisers… in the middle of the country' can change the world of investing. The implications for mega-firms like Goldman and JP Morgan are enormous because now the cost of advertising via viral marketing and social media has dropped to nearly zero. So, now the comparative advantage is in the agility of the smaller firm targeted at a specific market. Since many Vietnamese brokerage firms have nearly no marketing budget they don't need to focus resources on it or see it as a disadvantage, but rather can remove that from their thinking and lever social media as the means to attract clients and capital.
He gets it. Welcome to Vietnam, Joshua Brown, can I show you around town?
It has been my personal contention that the current market is a bear run within a longer-term consolidation that began in 1999 with a top of around 1550 and a bottom of around 800 on the S&P 500. Biderman's thesis here is interesting. Watch to see what he says. From a trader's perspective I would be leery of this market at these prices and these P/E's.
It's the next move in the Currency Wars, angered over the systematic weakening of the Dollar, the Euro and the Yen which culminated in a sharp decrease in GDP in 2011 (2.7% vs. 7.5% in 2010), Brazil slashed it's benchmark lending rate by 0.75% to 9.75%. The real had gained more than 10% year to date and this move was made to protect their export markets and goose industrial production which fell off 2.1% in the fourth quarter.
There is a fundamental fallacy in that line of thinking though. A stronger currency only superficially makes exports cheaper as the exchange rate differential from the perspective of the importer is offset by the amount of local currency he needs to purchase the items he is importing.
What's happening in Brazil is that their internal inflation has raged along at 10%, currently 6%, and that has domestic prices soaring to the point where it is cheaper for them to make a shopping pilgrimage to Miami; buying shoes and clothes at up to 80% lower than what they pay in Sao Paulo. The real has appreciated more than 31% in 5 years and the cumulative effect has created a massive distortion of prices.
Peter Pham is an author, international fund manager, and a registered financial director by the Cayman Monetary Authority (CIMA). In 2013 he published his first book entitled, The Big Trade: Simple Strategies for Maximum Market Returns. He currently manages the portfolio of a global hedge fund and runs an asset management company, Phoenix Capital. (read more)
The Big Trade: Simple Strategies for Maximum Market Returns
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