Month: October 2019

Presumably…

…misandristic slogans will be OK in the People’s Democratic Republic of Victoria.

The bigger question is who will be the arbiter of what is deemed inappropriate or not? We can absolutely bet the farm that the people selected to enforce this being the least qualified in being able to administer it fairly.

No one should have an issue with holding appropriate standards for slogans on vehicles (e.g. no profanity/nudity) but is there a pressing need to have apparatchiks pushing agendas on what they deem appropriate for the rest of us? How many vehicles fall foul of these crimes?

One can be certain that if a car is adorned with slogans that crudely vilify white heterosexual Christian males it won’t be deregistered. Perhaps Victoria should change its number plate slogan to “Victoria – the re-education state.

Perhaps Victorian Premier Dan Andrews should spend more time reflecting on his injecting room policy where the CEO of the centre has been stood down after some staffers were caught dealing drugs to the addicts that use the facilities. Who’d a thunk?

Black humour is a British trait but Brexit extensions just ain’t funny anymore

While black humour is definitely a strong British trait, there is nothing remotely funny about further delays to execute a Brexit deal. Despite the highest turnout in British voting history, UK legislators continue to show their employers utter contempt. We all know how King Arthur was eventually forced to deal with the Black Knight in Monty Python’s The Holy Grail despite denying the obvious.

While many Remainers argue that there was a whole swag of voters that didn’t show up on the day of the referendum – meaning the majority didn’t support Leave – they clearly showed by those actions that it didn’t mean enough to get to the polling booth. Too bad if they thought “remain” was a formality. It is a bit late to complain after the result. Tell that to Americans who believed in Hillary Clinton’s coronation three years ago. They can’t stop banging on about being robbed. That is how democracy works. Complacency is no excuse. Do we change the rules? Hand out mulligans?

It isn’t hard to work out what is at stake here. The EU wants to turn the UK into a colony. PM Boris Johnson’s latest deal was week-old leftovers from Theresa May’s disastrous proposal. Any deal short of “no” will come with so many caveats as to beggar belief.

To say that people were “duped/misled/lied to” in the lead up to the referendum is deceitfully condescending. People knew exactly what they were voting for. Now they see the very people sworn to represent them, going out of their way to cede more power to unelected bureaucrats in Brussels. The deal, as it stands, is the type of document a vanquished nation would be forced to sign – unconditional surrender. Blind Freddie can see that.

The greater irony here is that if politicians are so cocksure they can read the mood of the nation to the extent of lecturing citizens that they don’t understand the implications of Brexit they should use that same chest-beating confidence to win by a landslide. Surely was such conviction so iron-clad, they would call an election immediately. Yet the Remain camp steadfastly refuses, hopefully using the time to lock in cushy EU jobs post being turfed from office.

Maybe a crushing victory in the Rugby World Cup final this weekend will be all Britons need to know that they are capable of greatness on their own.

How Gold is made

Take a nerdy 5 minutes to see how gold is made. This was at Sovereign Hill in Ballarat, Victoria. The same 3kg bar has been smelted 90,000 times. No changes to purity whatsoever. Maybe that’s why it has long been regarded as hard currency for over 5,000 years.

Sadly this isn’t far off the truth in 2019

In the whacky world of trying to justify the ridiculous, this parody is a great stab at identity politics in sport…

The ultimate irony of renewable energy – go off the grid

Basically prepare for their failure and become self sufficient off the grid.

Phillip Island – a hit of nature

Before the petrol head in CM inhales the fumes of perfectly combusted fossil fuels of 300hp MotoGP bikes at 19,000rpm, CM is enjoying a rare sunny day on Phillip Island.

Could this be an indicator of the population density of the People’s’ Republic of Victoria when it goes 100% renewable energy?

Harley Davidson sneaks in a 50% cut to future hoping no one would spot it

Harley-Davidson’s (HOG) Q3 results continued the poor run. Declining global unit sales and 30+ day delinquencies plus annualized loss experience are at 9-year highs. The company sneakily halved its outlook on plans to cultivate its rider base which further shows the management is clueless and running out of options. It smacks of desperation.

Shares bounced almost 10% on the numbers. The funny thing is that quarter after quarter, the earnings releases read like Groundhog Day. Of any positive news, international ended up slightly positive (+2.7% for Q3, -3.9% for 9M) but were was still below expectations). Japan was cited as a positive. Then again Japan sales are 40% below the peak and have been dwindling for 10 years. Australia was ok but EU weak.

Only two thing worth paying attention to in these results.

1) Targets

For the last few years, HOG has been banging on about how it will create 2 million “new” US riders into the Harley fold by 2027. Indeed CEO Matt Levatich was adamant on the conference call that “the team is laser-focused on building riders today and preparing us and our dealers to welcome a broader array of new riders moving forward.” Typical bluster.

Levatich must be using lasers from The Dollar Store given their accuracy to date.

In Q3, HOG has shifted that language to 4m total riders in the US by 2027. It currently stands at just over 3m. So that 2m new US rider target has effectively more than halved but no explanation for the change was given which proved CM’s hunch. It was snuck in. HOG management said “we’ve done the math“. CM would argue, “what, so you hadn’t done it properly beforehand?” This only reveals the ineptitude within management ranks. Instead of investigating where the problem is needless share buybacks are continuing at a heady clip. $112.5m for the quarter.

CM has written in the past sets of results,

HOG’s 2mn new riders in the US by 2027 seems an irrelevant target. 200,000 “new” riders per year by definition should not include existing customers. Management combine new and used sales using IHS Markit Motorcycles in Operation (MIO) data, not their own! That is fine if all are new Harley customers yet the brand has some of the highest loyalty rates of any maker period. Are we to believe that long term Harley owners didn’t upgrade?

Of the 138,000 new domestic US sales in 2018, the brand assumed 278,000 new riders to the family. It also cites that 50% of that were 18-34yo (implies poorer product mix), women (smaller capacity hence poorer product mix) or ethnically diverse (irrelevant) riders. So by definition at least 140,000 sales were used bikes. Harley used bike sales in America are around 2.5x new, or 350,000 units. So assuming half were new customer sales for new bikes, 60% of used sales must have been to ‘never owned a Harley’ customers. Seems high.”

Yet Levatich continued in the conference call by saying,

guiding all our efforts is deeper analysis and insights on why people engage, participate and disengage from riding. Our advanced analytics capabilities and rider migration database has evolved into a powerful asset and a wealth of information and inspiration for us.

But Mr Levatich, HOG unit sales and revenues have been in retreat for 5 years in a row. Sure, motorcycle markets are tough but it hasn’t affected other premium makers BMW Motorrad, KTM, Ducati and Triumph at the luxury end. HOG sounds a bit like the Australian Wallabies. Lots of positive talk despite overwhelmingly negative signals, results and glaring problems with the management structure. It is time to wake up. HOG is missing the simplest of things – product that customers want.

This is a company that continues to rely on its 116-yo divine franchise. Basing its future on what seems to be a marketing company puffing up fanciful predictions in the face of a dire outlook. The worst thing about it is that management is in denial.

2) Finance

HOG is the ultimate discretionary spending item. Doesn’t seem that they are spending at HOG. If anything, the financial services business shows current customers are struggling to pay their loans. An interesting anecdote from Polaris (PII) Q3 results overnight was the claim that its Indian brand (which competes directly with Harley) admitted,

North American consumer retail sales for Polaris Indian motorcycles decreased mid-teens percent during the third quarter of 2019 primarily due to the weak mid to heavy-weight two-wheel motorcycle industry that was down high-single digits percent and retail pressure from heavy competitive promotional spending.”

If HOG is cranking up the finance and promotional spending shouldn’t investors be wary of a further deterioration in the types of customers they are lending to? When CM covered HOG as an analyst 20 years ago, the then management told CM that Harley owners would forgo the mortgage before payments on the bike, such was the rock-solid nature of the finance arm.

No, HOG’s loan book is unlikely to bury it but the signals are such that it is having to resort to pushing so much harder to make sales. That is evidence of a soft backdrop which management is not being open and transparent enough about.

HOG fortunes are bound to get a lot worse before they get better. The hopes and dreams of the delayed electric LiveWire e-bike is too expensive to attract eco-mentalist millennials and completely unattractive to overweight bearded men covered in tattoos to desire. Harleys were always an escape tool. Products where owners could hide away in the man cave tinkering. That isn’t to say that Harley doesn’t need to innovate but at the moment it isn’t staying true to itself. That is why customers are disengaging.

Expect the 2020 numbers to follow the trend of the last 5 years. An utter disaster.

NB this piece does not constitute as investment advice. CM has no positions in HOG.

Teflon Trudeau

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At this stage, it seems that Canadian PM Justin Trudeau will form a minority government. Look forward to 4 more years of gaffes ahead. Having said that, the Conservatives need to take a long hard look in the mirror and realise they lost to a completely empty suit. That speaks volumes of their (lack of) popularity where it mattered. CM has said for a long time that Rona Ambrose was always the better choice to be the leader of the Conservatives. This was an own goal.

Trudeau had blackface, brown face, dressing like an Indian, using words like peoplekind, using two planes on the election campaign and the Trans Mountain pipeline debacle despite his climate emergency antics, found guilty of breaching ethics in the Aga Khan and SNC Lavalin scandals and even suggesting the use of haiku and poetry to assimilate returning ISIS fighters etc. against him but despite all that and more, it didn’t upset enough Canadians to sway their vote. All of this was on the ticket, much like Trump’s “grab ’em by the p#ssy” remarks. Say all you want about the morals or ethics of those that still voted for him despite all this. It is irrelevant. They did. Deal with it. For once Obama got a call right.

The Conservatives should have done far better but obviously failed to connect with the people. Scheer should step down as leader. Canada is obviously not that conservative despite a strong gain. Sadly, Scheer’s performances were quite poor in the final weeks when deflecting questions, especially related to hiring people that Trump used on his campaign. Just sounded disingenuous. Best to admit it and carry on. If there was a worry this would be discovered Scheer’s team shouldn’t have hired him.

No point in Conservatives wheeling out the old “we won the popular vote” excuse as the Democrats did in the 2016 US election as Trudeau has held onto power by the rules. In the end that is all that counts.

Still, Canadians, nor the Liberals should be cheering the outcome. Minority governments are poisonous. Australia’s 2010 election proved how disastrous compromise can be. As politicians look to serve their own interests, poor compromise is often made. Note that Singh’s NDP has been slaughtered so even as a coalition partner, he can’t wield so much power with such a poor outcome, so net-net Trudeau won’t face much of a different landscape.

On a positive note, by losing their majority, the Liberals will also lose a majority on parliamentary committees. This will mean far less ability to shut down investigations of scandals. A strengthened opposition may look into a deeper investigation on SNC-Lavalin but is that what Canadians want?

So with bitter disappointment, congratulations still go to Teflon Trudeau. CM believes it will be a case of buyer’s remorse in Canada. Conservatives have 4 more years to get their house in order. Much like Albanese is struggling with Labor’s platform in Australia, Conservatives need to wake up and smell the coffee.

It is worth assessing what has happened in Canada translating south of the border in next year’s US presidential election. Can people see how despite being cloaked in scandals, gaffes, blunders and many other flaws, Trudeau didn’t lose enough voters to cost him his job? That is why, despite the hateful media, Trump is set to romp home in 2020. Ultimately people care (and vote) about issues affecting them, not the morals or actions of those that hold power. Do people really think the Democrats are in with a shot with the current crowd of candidates? Trump has a Teflon coating too.