The Ticker: Modern business life

Confused about oil prices? This simple graphic explains the global price cycle; Is this the source of Ten’s turnaround confidence? And this year’s biggest anti-climax: the RBA’s rate decisions

On today's blog:

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2.40pm - This year’s biggest anti-climax: the RBA’s rate decisions


Despite the sound and fury from onlookers and the press, the Reserve Bank has held the cash rate at 2.5 per cent for all of 2014. Today’s decision completes this trend.

The dullest graph I have ever made.
 

Rate decisions always generate attention. That’s fair enough, given that changes in the interest rate affect most homeowners and sway the Australian dollar.

As a consequence, rate movements are the subject of feverish speculation. To put today’s forecasts for a rate cut in 2015 in context, we thought we would show you what the press was saying this time last year.




 

Let’s hope 2015 proves to be more … eventful. 


1.30pm - What will a smartphone cost in four years?

By Chris Kohler, BusinessNow


Global smartphone shipments are expected to hit 1.3 billion in 2014, a 26.3 per cent increase on last year, according to research firm IDC.

It’s no real wonder, then, that Apple’s market value has hit $US700 billion, and even the bedraggled Blackberry is having another crack (it’s now offering to buy iPhones from the public) -- business is booming.

IDC expects 1.4 billion smartphones to be shipped in 2015, which is a year-on-year growth rate of 12.2 per cent -- less than half the 2014 growth rate but still pretty hefty.

By 2018 shipments will be 1.9 billion units -- a massive output but you can see what’s happening to growth as the market matures.

But the high-fives and champagne popping from the big players might not last that long. As the market continues to see new low-cost manufacturers joining in, particularly in China, prices will drop and so will revenues.

“The impact of upstart Chinese players in the global market will be reflected in the race to the bottom when it comes to price,” says senior research manager Melissa Chau.

So, what will a smartphone cost you in four years?

According to IDC, the worldwide average price was $297 for a smartphone in 2014 and in 2018 it’ll be $241 -- not a price fall worth getting too excited about, really.


12pm - Is this the source of Ten’s turnaround confidence?

Ten is back in the news after a report from The Australian claims that the network will today reject Foxtel/Discovery’s low-ball bid for a small stake in the company. Given all that we’ve read about is Ten’s sliding ratings and its revenue 'death spiral', one would think that it would accept whatever it they could get.

But it seems it is holding out for a better offer. According to the report, Ten is also considering privatisation in a bid to repair the company away from public scrutiny. This confidence likely stems from assumptions that Ten can indeed manage a turnaround.

The good news is that history appears to be on the network’s side.

From a short-term perspective, it seems an impossible feat. However, the graph from Citi charting the network power index (a measure of ratings and revenue) reveals that a ratings and revenue rebound could be on the cards. Both Nine and Seven have suffered similar downturns in the past two decades and have since recovered. However, a weaker TV ad market and the growing popularity of online streaming may make a Ten turnaround tougher (and more unpredictable) than any other previous recovery. 


10.40am - Is BHP a bargain or is it time to bail?

By Chris Kohler, BusinessNow

BHP Billiton gave investors quite a scare yesterday after it fell 5.3 per cent to close at its lowest level in five years.

Shares in the world’s biggest miner breezed past a 2012 key support level of $30.09 as the Australian market lost 2 per cent amid a fresh panic over commodities.

But BHP could claw back above that symbolic $30 mark today, with American Depository Receipts (converted to Australian dollars) pointing to a $30.20 open.

Will investors see BHP as a bargain and push a 2.5 per cent recovery during trade, or will they see now as the time to get their money out of resources before the road gets even bumpier?

Citi is jumping onboard – upgrading BHP to buy from hold and dropping its price target a full dollar to $37 from $38.

“The reduction in our target price is driven by the earnings downgrades from lower commodity prices,” the broker says.

“The recommendation has been upgraded as the recent share price falls have created sufficient upside for a buy recommendation.”


10.15am- Confused about oil prices? This simple graphic explains the global price cycle


You don’t have to drive a car to feel the effect of a falling oil price. Oil plays a major role in many facets of our society, including goods transportation, product manufacturing and power generation. As oil continues to decline, we may start to see prices decline in other areas of the economy.

Here’s a graphic from Morgan Stanley that explains why prices are on the decline. It all boils down to supply and demand.


 
The story behind this sudden drop is a little more complex. It began with a spate of new shale oil projects in the US that flooded the market with excess supply. Now, rather than reduce supply targets to rebalance prices, the Organisation of the Petroleum Exporting Countries decided to main current supply targets in order to drop the price even further to close down new US plants by making them economically unviable.

Global political tensions aside, it’s all good news for Australian consumers. But as we’ve pointed out earlier on The Ticker, it’s disastrous for nations like Russia and Venezuela, which rely on oil exports as a major source of revenue.


9am - Interesting reads from around the web

Heads up: Some key assumptions in Joe Hockey's budget are now completely wrong.

“We are all Japanese now”: How the Bank of Japan is about to kick off the next round of the currency wars.  

Overworked and uninspired:
The misery of middle management and why few are keen to climb the leadership ladder.

Looking for holiday plans? Diving with sharks and the rush of pleasure that comes from facing our fears.

No joke: Elon Musk’s SpaceX is hiring a farmer.