Tony's tips, November 19: Apple, oil and concerts
By Tony Field
The New Zealand dollar has been falling in recent days and could be set to slide even further.
It is because of the United States economy and US interest rates.
Investors have become increasingly confident that the Federal Reserve will hike rates next month. If it does it will be the first rate increase in the US since 2006.
Higher rates would likely send the US dollar higher because cash deposit rates would go up in the United States. That makes the US dollar more attractive to investors.
A rate increase would also be seen as a vote of confidence in the US economy.
The Kiwi was trading at 64.46 US cents at 8-30am, compared to 64.66 cents at 5pm yesterday.
A weaker dollar drives up the cost of imported goods. Not right away, but eventually.
In most cases it takes months to flow through to the local shops. Especially when many retailers are reluctant to raise their prices because of competition from online retailers.
But you do notice the weaker dollar quite quickly if you are shopping online with overseas retailers.
You will also see the effects of a weaker dollar at the local petrol pumps.
A weaker dollar means higher fuel costs.
The one thing that can prevent that is if oil and imported fuel prices are falling more quickly than the New Zealand dollar.
Crude oil prices fell further this morning.
West Texas Oil briefly dipped below US$40 a barrel this morning. It has not been that low since August.
DAIRY FARM PRICES FALL
Prices are falling for dairy farms, according to the latest data from the Real Estate Institute.
The REINZ Dairy Farm Price Index fell by 18.6 in the three months to October, compared to the same period a year ago.
The median sale price per hectare was $31,552 in the three months to October. That was down from $43,299 in the three months to October last year.
Other types of farming properties have generally fared better, with the REINZ All Farm Price Index down 5.9% in the three months to October compared to the same period of 2014.
A BITE OF APPLE
Apple's share price leapt 2 and a half per cent this morning.
That was after a report was issued from Goldman Sachs that predicted the stock could rise 43 per cent in the next year.
Goldman Sachs believes that Apple is priced like a computer hardware company that has solid but not spectacular earnings.
However Goldman believes Apple earnings will in fact be more like a Google or a Facebook.
So the investment bank believes Apple is undervalued.
Goldman has a price target of US$163 per share. Apple was trading at $113.69 before the report was issued.
The bank argues that a growing part of Apple's revenue will come from services like Apple Music. These are services that generate recurring revenue from subscriptions.
Take a look at Trade Me and you will see plenty of tickets being offered to sports events and concerts.
But the local trade pales beside the resale market in countries like the United States.
It is literally a multi-billion dollar business.
A common complaint from artists and their managers is that they are missing out on this revenue.
The Wall Street Journal reports that two high profile music business executives have hatched a plan to give artists a bigger share of the secondary ticket sales market.
Music manager Irving Azoff and former AEG boss Tim Leiweke have formed Oak View Group. It will advise venues on everything from renovations to naming-rights deals to ticket re-sales.