With another stupid stock week under the belt, this week proved what we mostly suspect – we play follow the leader with Wall Street. Recall that a poor jobs number in the States (74,000 instead of 200,000 expected by experts) rattled our stock market first and then the Yanks sold off big time. That spooked us on Tuesday as well, with what was a silly overreaction. Then reality re-arrived, with good company reporting news and solid economic data.

The reaction was very bullish in New York and we, in turn, totally changed our attitude with the S&P/ASX 200 index up 1.8% in two days.

Get used to this, until some meaningful pullback happens or some unambiguously great news keeps pushing US stocks higher.

In my perfect stock-buying world, we’d see a sell-off after January, which we would use as another buying opportunity, then sit back and watch stocks roll higher in the second half of the year.

What I liked seeing this week

The best news I saw this week was the tumbling of our dollar down to US88c,  then US87.7c this morning, though it was a pity that it coincided with a weak jobs number here on Thursday for the month of December.

I’m on a unity ticket with the RBA that a dollar at US85c would be good for the economy, while the US80c target would be even better. It would mean, however, that our economy is so weak that the Reserve Bank might have had to cut rates, twice!

For our stock market to reach the 6000-level that I’m punting on, it needs the following. This is what I am looking out for:

• Continued good US economic data, such as the Empire State manufacturing index, which spiked in January to 12.5, (the best reading since May 2012). In case you didn’t know, the Empire state is the state of New York and is a closely watched indicator. Also, the Beige Book (an eight-times a year snapshot of the regions of the US economy) was a positive read on the US economy.
• Great US companies, such as Wells Fargo (the biggest mortgage lender in the USA), and Bank of America (the biggest bank in the USA) both reporting better than expected. AMEX doubled its profit too, which is a good consumer spending sign.
• Tapering  by the Fed to be cautious and not too fast.
• Big jumps in European stock market indexes as we saw this week, with the German Dax up over 2% on Wednesday and the French CAC 40 up 1.3% while the UK’s FTSE put on 0.78%. And the big moving force was the World Bank, which said global growth was going to be better than expected. Growth is projected to strengthen to 3.2% this year, 3.4% in 2015, and 3.6% in 2016 – up from 2.4% in 2013.
• At home, I want the dollar to fall to around US85c and I don’t want a horror Budget on the second Tuesday in May. This economy needs stimulation to get over the negatives of 2013, so tough love from Joe Hockey should come in 2015, when our economy is growing over 3%.
• And, finally, I want to see some good Aussie companies surprising on the high side in February with earnings. This could be the riskiest wish I’m making but, if we can come through, it will be a great fillip to the market. Deep down, I suspect we might have to wait to the next earnings season for some really good news. Hope I am wrong on this.

What I didn’t like this week

• That silly Monday market negative reaction to the US jobs number, which was even dumber on Tuesday. I can see why Bob Geldof wrote “I Don’t Like Mondays”. Without a Wall Street lead, we nearly always err to the negative, until the Yanks make up their mind on what they want to do with stocks.
• Xero’s share price at nearly $40, when my wife told me to buy it at $14 after I MC’d their conference, but some of the smartest brains in the country told me its price was unjustifiable at $14! (Thank God BOQ was up over 70% since early January and that did conform to sensible investment criteria, such as management track record, intrinsic value and actual earnings, etc.)
• That local job number where we lost 31,600 full-time jobs but picked up 9,000 part-time ones. I don’t trust that number.
• The headline “How legal marijuana could be the next great American industry!” (I’d ask what the Yanks are smoking but it’s pretty self-evident.)

The really good news

I liked hearing that the Dow was specked to beat 18,000 this year by Finance Professor, Jeremy Siegel, who teaches at the University of Pennsylvania’s Wharton School. This guy is not a dope and it’s good to see he remains bullish.

The really, really good news

The Goldman Sachs speculation (or was it calculation?) that said, because of lofty valuations, there was a 67% chance of a correction, which means a 10% slump in stocks! Good news? Only better than expected profits can KO this call, so we will monitor earnings closely. By the way, Goldman still thinks the S&P 500 goes up to 2,100 this year and that’s a 14% gain for 2014, which is really, really good news!

The really, really, really good news

My son Marty hosted my Switzer program on the Sky News Business Channel over the last two weeks and did such a great job. Clearly, he not only takes after his mother in looks but also in determination to be professional. (If you missed him, the Best of Switzer is on the Sky Business channel on Sunday at 8am, 11am and 6pm. And if you don’t have Foxtel, you can go to www.switzer.com.au By the way, I’m back on TV as of Monday.

Top stocks – how they fared

Numbers that moved the market

The doves at the US Federal Reserve were out in force this week, talking down the less than impressive payroll numbers from the week before. Dennis Lockhart, Charles Plosser and Richard Fisher were among board members to endorse further cuts to quantitative easing. Fisher, the president of the Dallas Fed, said he would support another taper even if it caused an equity correction.

The jobs number seemed even less significant with the release of solid retail sales figures on Tuesday. Sales were up by 0.2% in December and finished the 2013 calendar year up 4.2%. The news saw Wall Street record its best performance of the year so far.

There were some gloomy jobs numbers locally this week as well, with employment falling by 22,600 in December, according to the ABS on Thursday. That brought the total number of jobs created in 2013 to a measly 54,600 – the weakest result in 17 years. But as was the case so often in 2013, bad news resulted in good news — the jobs number didn’t seem to affect the equities market at all and instead saw the Aussie dollar tumble.

The week ahead

Australia
January 20 CommSec State of the States
January 20 Inflation gauge (December)
January 22 Consumer sentiment (January)
January 22 Consumer prices (December quarter)
January 23 Detailed employment data (December)

Overseas
January 20 China Economic growth (Dec quarter)
January 23 Chicago Fed National Activity Index (Jan)
January 23 US Initial Jobless
January 23 US Existing home sales (December)
January 23 US Leading indicators (December)
January 23 US House Price Index (November)
January 23 Global “Flash” manufacturing (January)

We can expect a couple of significant figures this week, both at home and abroad, kicking off with CommSec’s State of the States report on Monday.

The big talking point of the week is likely to be the release of key inflation data, with TD Securities’ monthly gauge released on Monday, followed by the quarterly consumer price index on Wednesday. Economists are confident inflation will remain within the Reserve Bank’s 2-3% target band, with CommSec’s Craig James predicting a 0.4% increase for the December quarter. This would put the annual underlying rate at around 2.4%.

Westpac and the Melbourne Institute’s consumer sentiment data is also due for an upswing, with warmer weather, rising house prices and recent share market gains driving confidence in the economy.

Offshore this week, “flash” manufacturing PMI numbers will come out for the main global markets, while in China key economic growth data for the December quarter is likely to show a slight increase from 7.6% to 7.8%, according to economist’s predictions.

Calls of the week

There were plenty of calls outlined in Short n’ Sweet this week, and my favourite was on US 3D printing company Stratasys. In June we published a Fundie’s Favourite article on Stratasys when its share price was $85.60. It’s risen steadily since then and was trading at $122.88 on Thursday.

I also liked Peter Fitzsimons’ call that the slogan ‘Just do it’ on Tomic’s shirt in his press conference after retiring injured against Nadal, was a wardrobe malfunction. While I certainly agree that even the best players in the world need to be 100% to have a chance against Nadal, I think Tomic is experiencing a classic case of the boy who cried wolf.

There was a great story out this week of a small US company called Nestor whose share price skyrocketed 1,900% after investors mistook it for Nest Labs – a small startup which has been recently acquired by Google. According to The Telegraph, stocks went from 0.2 cents per share to reach nearly 5 cents in the height of the confusion. A similar thing happened late last year when investors threw money at Tweeter, mistaking it for the social media giant, Twitter.

Last week’s TV roundup

Marty continued to host the show for me last week, but I’ll be back in the chair on Monday.

Following a prosperous 2013, will the world economy and global markets continue on this upward trend over the coming year? Chief economist at HSBC Paul Bloxham provides insight into what we can expect down under, as the US economy continues its post-GFC recovery and Chinese growth slows.

It’s already the third week of January, but you’ve still got time to get started on those New Years resolutions – and if managing a successful SMSF is on the list, you’re in luck! We speak with the head of SMSFs at Westpac, Sinclair Taylor, about how to manage your fund for a prosperous 2014.

Leading superannuation authority Tony Negline talks us through the people you need to run a successful SMSF. Spoiler alert: Look for someone who is “proactive but not a pest”…

With the markets on an upwards trajectory, rising 1.2% on Thursday, we talk with shares expert Simon Bond from Morgans, about the market and where it’s going over the next year.

Stocks Shorted

ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short – which could suggest investors are expecting the price to come down. The table also shows how this has changed compared to the week before.

Very little movement on this front over the last week, with the biggest mover Atlas Iron (ALQ) whose short position opened by just over half a percent.

My favourite charts

It was a pretty quiet week in the way of charts, but I came across this after Hewitt went down in another thrilling five-setter! I’m not sure of the technical accuracy but it made me laugh!

Top five clicked on stories of the week

Paul Rickard: Our high-income stock portfolio for 2014
Peter Switzer: Do I see a secular bull market looming?
James Dunn: Three must-haves in the consumer discretionary jungle
Roger Montgomery: A good-value medical opportunity in LifeHealthcare
Rudi Filapek-Vandyck: Buy, Sell, Hold – what the brokers say

Last week’s Switzer Super Reports

Thursday, 16 January 2014: Bouncing Cats
Monday, 13 January 2014: A good year for sleeping

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.