## On Officeworks & Blockchain Potential ##

By September 19, 2017Bitcoin, Investing, Macro

To begin if you haven’t read Joe Aston’s piece on Gerry Harvey & the impending doom that is facing Harvey Norman then I strongly urge you to do so. He absolutely lines him up & knocks him down re Amazon’s entry to Australia and Gerry’s readiness (and inability) to defend against it. Link below…

Click here it’s worth it- http://www.afr.com/brand/rear-window/gerry-harvey-can-have-dubbo-amazon-will-take-the-rest-20170917-gyj427

REGISTER NOW for the VFS Global Macro Fund 20 Minute Update: Thur 21 September 7.10pm

On that subject over the last year writing about the disruption facing the Australian retail market I’m afraid I’ve been somewhat bearish on the space. However I had an incident this week that absolutely confirmed why.
I required a USB cable last week to hook up a monitor to my laptop. Nothing amazing, just a simple “male-to-male” USB cord to get the job done. Obviously (because I needed it that day) I went to the Officeworks around the corner to have a look. Rather than send my assistant I wanted to go and have a look at what was on offer, knowing that these sorts of electrical goods are going got be bread and butter for my favourite US company.
For a start I couldn’t find what I wanted immediately. I found the aisle easily enough but not the product. I found a USB to lightening, USB to HDMI, USB to VGA, everything except USB to USB.
That’s annoying.
I finally managed to wave a staff member over to assist just as a client returned my call regarding an options strategy I was placing that afternoon. I mentioned to the staff member what I’m after just before answering the phone to walk the client through the strategy and within the next 10 seconds the very helpful (and considerate) team member had a cable in my hand. Brilliant.
Mouthing “thanks and sorry” to the Officeworks employee (as I was still on the phone) I headed to the counter to wait for my turn to pay.
Not a long wait and a register is free and the cable is scanned.
$40. Seriously, $40.
Still talking to the client I paid, ensured I had a receipt and very darkly walked out of the store, my fury building at the price I’d just been charged for a 1m length of USB cable.
Once I’d calmed down enough to think about it I was ok with the idea of Officeworks going bust and as an aside I place three tweets from @IPOSociety that tell a story of how the market really underestimated the potential Amazon effect to retailers like Officeworks and how ambitious certain companies (and their advisers) were to put companies like Officeworks in front of unsuspecting retail investors.

March 9: Everything’s great, we’re all going to get paid.

May 18: “Retail jitters” are a real thing. We’re pulling the IPO

September 14: Maybe if we bundle it up with Kmart no one will notice…

 

Between March and September Officeworks has gone from Wesfarmers trying to spin it out as a “Baby Bunnings Category Killer” to being packaged up with a couple of dogs like Kmart & Target and flogged off. I’m reminded of the packages of bad US mortgage debt sold to unsuspecting local councils prior to the GFC.
There’s a good chance that this spinoff provides a good opportunity to have another look at Wesfarmers but let’s have a look at what plays out before charging in too enthusiastically.

But enough of this speculation, school’s in session.
All the talk at the moment is on two things: Lithium and Crypto-currency. After a coin flip I decided to look at the latter so I’ll post a handy guide to what all the “Crypto” talk is for those with actual lives who may have missed the scoop.
http://www.visualcapitalist.com/comparing-bitcoin-ethereum-cryptos/
Remember my note a little while ago calling the top in crypto-currencies being the moment Paris Hilton decided to get in on the action.
Here’s Bitcoin since then:

The high at the beginning of September was about where Paris started getting involved… Courtesy Bloomberg

We’re not so much interested in the Crypto/Bitcoin space but are having a really good look at the technology behind it: Blockchain.
We know everyone’s been talking about “The Chain” for ages and we’ve been watching all the time. We think there’s more to the story than we’ve already seen & are keen to latch on to the downstream winners. Since Blockchain allows for a verifiable and “unfakeable” tracking system I can already see upside for our food stocks (Bellamy’s, A2 Milk etc) who always have had an issue with ensuring trust with the Chinese consumer. Where once the Daigou was your source of trust, filling suitcases in Australia with powdered milk and taking it back to China, Blockchain now potentially ensures that trust.
This one will play out for a while and I’ll keep you posted.

An oldie but a goodie…

Remember just because it’s a bubble doesn’t mean it’s going to burst (again think Aussie housing) but the real way to tell it’s a bubble is when this sort of thing starts to happen.In macro news (and not to rehash the quotes and comments bandied about this week) but here’s a quick summary of Central Bank chat recently:
The UK are talking about raising rates soon and so is the European Central Bank. On Thursday morning the US Fed will (probably) detail how they plan to think about maybe planning to unwind the ~$4.5 TRILLION balance sheet they’ve accumulated since the GFC. Since that number equates to about a quarter of the GDP of the USA we’re flagging that as “somewhat significant”.
Fact remains global rates are going up and that’s why we’re long global financials. Confucius knows what he’s doing.

Don’t forget about our 20 minute webinar on Thursday night. Just a quick overview of what’s going on. Register here.

Stay safe & all the best,

James Whelan & the VFS Investment Committee 
Level 30 Australia Square, 264 George Street, Sydney NSW 2000
t +1300 220 360  | m +61 407 958 036 |  www.vfsgroup.com.au/gmf

Additional: Our own Head of Financial Advisory Danilo Medojevic has been shortlisted for the finals of the SMSF Adviser Summit Awards in the field of SMSF Investment Strategy. We wish him all the best to get the gong. 


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