MoneyNews
Friday, July 8, 2005

1. More Evidence of Slowing Australian Housing Market

They say it can't happen in America.

But if Australia is any indication it can.

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Home owners Down Under have had to drastically reduce their prices in order to sell their homes in May and June, according to data from the Australian Property Monitor.

Two years ago sellers would accept offers within five per cent of their asking price, but by May 2005 they showed their anxiety to get the deal done by lopping off 7.2%. That's up from a nationwide 6.9% average in April.

The worst affected were Sydney, Canberra and Newcastle where home owners were forced to accept 7.8% less than the asking price. Each city witnessed an increase in the discounting affect from the previous month.

The data confirms that cooling in the Australian housing market continues.

Acording to Bureau of Statistics prices in three large cities have fallen in year-over-year terms lately.

In Sydney prices fell 3.4% in the year to March, while Melbourne prices fell 1.7% and those in Canberra fell 1.3%.

The number of days it takes to sell a house remained steady at 85 days after a long period of increase.

Editor's Note:

• Sir John Templeton warns of a housing crash -- profit from it! Go Here

2. Betting on the Euro Property Bubble

It really must be a bubble as plans to take bets on Euro property emerge.

When we picked up the newspapers this morning to find fresh news for you we had some hot topics.

Of the 32 equity analysts who follow the fortunes of Google (GOOG) since its August 2004 dated inital public offering, not one rates it a 'sell.'

One in four advise investors to hold while the remaining three out of four advise 'buy' on the stock.

With shares rising relentlessly some analysts have been prompted to raise their target price for the search-engine company. With shares recently hitting $309 investors still remain hopeful that there may be still more juice left in the stock.

After all Smith Barney recently lifted its target to $360 per share within the next 12 months, while both RBC Capital Markets and CSFB target $330 and $350 respectively.

Investors have wondered just how much can be left for the surging shares since Google is a search engine and has perhaps exhausted the cash streams from its paid key word search model.

However, the company has launched a major new initiative that might underpin those hopes by investing in Current Communications Group. The aptly named company provides high-speed Internet access not via conventional phone or cable lines but instead over the power grid.

Google has joined investment banker Goldman Sachs and Hearst Corporation with a $100 million investment, according to the Wall Street Journal.

Current Communications, based in Germantown, Maryland, uses a technology to tap into the growing broadband market and targets users who are not presently offered high-speed access to the Internet.

Because power and Internet signals have different frequencies, the lack of interference allows Current Communications to provide its technology over conventional power lines direct to business and homes.
The recipient simply inserts a wall plug modem the size of a cellphone charger in to the conventional outlet and has Internet access ready to go.

Currently focussed on the Cincinnati area, the company may well use the latest investment dollars to expand its catchment area.

Current Communications says that uploads and downloads are equally speedy, which the Journal suggests may come in handy for Google's video-search function.

From Google's perspective, they simply state that part of their corporate mission is to increase universal access to the Internet for users.

It's potentailly a great plot. Imagine the day when you won't need to find a Starbucks in order to connect your laptop -- you simply can plug it into a power outlet!

For Google, the partnership with Goldman Sachs and with savvy media company, Hearst Interactive Media, shows that there's more too this company than meets the eye.

For now at least its shares look likely to rise from their current $293.

Editor's Note:

• Is the tech market making a comeback? Cash in on key sectors! Go Here
  

4. Stocks Discount Slowest Earnings Growth

Stock market bulls will be hoping for a surprise in earnings again as the announcement season for earnings kicks off later this week.

As the second quarter ended last week Thompson Financial, which collates earnings estimates, predicted a collective 7.4% growth rate for S&P 500 companies. That's the lowest estimate since a 7% rate of growth projected for this period two years ago.

But ever since the fourth quarter of 2002 actual results have beaten the pants off the initial estimates. Much of the decline in stocks earlier this year can be blamed squarely on the anticipated slowing of the U.S. economy.

The 13.9% first quarter results this year far exceeded the 7.6% estimate in place at the end of last year.

Still, the evidence points to some degree of cooling, which really isn't a surprise since the economy did emerge from a recession. During each of the past three years there has been a decline in second quarter earnings from those of the first quarter.

The 29% decline in earnings posted to start this year was the lowest since that second quarter of 2003 when growth was just 9.5%.

However, we have to note that since that point the economy has continued to grow despite surging energy prices and continued fears of a slowdown.

With investors already discounting minimal growth in second quarter earnings there is always the element of positive surprise to factor in.

In recent days, investors have been delivered two key pieces of survey evidence that companies are more optimistic than had been predicted. That news seems to catch the market on the hop.

Finally, it's worth noting that when earnings were expected to be as weak as this two years ago, the average S&P 500 stock began the quarter trading at a price to earnings multiple of 30 times, which is pretty expensive. Today valuations are much more attractive at 19.8 times the last 12 months earnings and just 16.1 times forward earnings.

Editor's Notes: