Happy birthday this weekend to bull market supporters, with March 9 being the day I best remember (apart from my family’s birthdays and a few public holidays) as the time the GFC-created crash turned around.
A big cheerio to all those Switzer program viewers who have gone along for a ride that was a bit worrying in those early days, when I only had a handful of co-barrackers for the rally that turned into a bull market.
Of course, my next ‘easy’ challenge is to give a big yell when I think it’s time to question the longevity of this uptrend for stocks, though I’m not expecting it to be any time soon.
Back to now, and there was a time on Monday when I thought my “time to press the buy button” suggestion last Saturday would be brought undone by Vladimir Putin – on a bear! – but good sense prevailed.
Isn’t this the best picture?
So the next issue to take on my “buy time” line was the jobs report in the US on Friday.
Before this usually important number was released, our All Ords hit the best closing level of the year of 5477.00. And in the typical kind of surprise that tells you to always expect the unexpected when it comes to stocks, the Yanks actually got a better than expected number. And guess what? Wall Street headed south!
Why? The best I can come up with is profit taking and it’s relevant, given the fact that short-term traders control day-to-day fluctuations.
The end of the week can bring out the profit-pocketing brigade and given the nice run up in recent weeks (plus the dark cloud that still hangs over the Ukraine), you can see why some players would be happy to work off the old market adage of “nobody ever went broke taking profit.”
By the way, Vlad the Usurper wants the Ukraine to pay its US$2 billion gas bill and that spooked a few investors.
On the jobs front, (a better than expected) 175,000 new positions were created in February, following only 129,000 in January, but the unemployment rate went up to 6.7%. This statistic can be a bit screwy at times. The real take-out for US stocks and, therefore, our market is that the US economy is recovering, jobs are being created and the rise in the stock market is being justified by data that says more good news is likely to come.
And what a week at home! We had GDP up better than expected at 0.8%, which I annualise to 3.2%. Remember that we need 3% growth to get unemployment to fall. A big trade surplus, retail sales up for the ninth month in a row (and it was a big 1.2% rise in January) plus a good new home starts figure! If you throw in the good earnings and dividends, the RBA boss telling us that he’s holding cash rates at this record low level and Joe Hockey hosing down the horror budget scenario, as well as well China re-committing to its 7.5% growth target, then you have great reasons to remain a believer in the bull market. As Charlie Aitken would say “see ya at 6000.”
On other related matters, the following were important eye grabbers:
- Warren Buffet’s re-take on a Barton Briggs line that “A bull market is like sex. It feels best just before it ends.” But the better lesson was what he added, that when it comes to investing “keep things simple” by “accumulating shares over a long period and never sell when the news is bad and stocks are well off their highs”. Great advice, especially if you invest in quality companies – not the Babcock & Browns and ABC Learning type stocks.
- The Internet Index in the US is up 485% since March 2009 and it shows the value of investing long term in the industry of the era. The Internet has been the dominant theme of the decade.
- Facebook is up 29% for the year, which is explained by Zuckerberg getting the mobile play right. A company can turn around if it confronts its failings, which is advice that airlines and many companies should confront.
- Interviewing Gerry Harvey this week. Again, he hit his media and online critics for a six, pointing out that retail is the toughest ever because of the Internet and that he’s trying every retail trick imaginable to beat the challenges. He made a great point that online retailers will always give you revenue figures but not profit. His take on this was typical Gerry: “When people don’t skite about profit that’s because they don’t have any!” He also said he has not lost the passion to find a solution but “when I decide I am not up to it, you will be the first I tell.” (I will remember that one and I have it recorded!)
- John Borghetti fired up on my program defending Virgin Australia and taking on Qantas. This is a guy who does not name names and fight in public but the airline dog fight has raised his Italian “if you’re going to mess with me, well I’m going to mess with you” spirit.
- James Hogan, the boss of Etihad, making the point that airlines can’t make losses forever, and that virtually it’s time good sense prevailed. James did deliver this message to me this week with more subtlety but that was the bottom line.
- A question from a subscriber about the investment clock but I’ll make this a full piece in our Monday newsletter. Guessing the time is tricky but I reckon we’re past 7 o’clock (which says falling interest rates) and somewhere past 8 o’clock (which brings rising share prices) but I need more space to devote to this so let’s talk Monday.
- Charlie’s Angels for the week were Seven Group Holdings and AMP and the S&P/ASX heading to 6000!
I have to make a small correction to my old mate Charlie, when he cheered the great GDP number for December and said “no one picked that!” which made me think, “Gee, he’s not reading me closely enough.” We need to chat Charlie. (And speaking of corrections, my thanks go to Ian, a subscriber, who gave me a language lesson from last week’s newsletter when he emailed: “Peter, I’d just like to say that I am not at all fazed by your use of the word “phased” in the paragraph below…” Love readers who take in every word, so thanks Ian!)
Top stocks – how they fared
Numbers that moved the market
Did you hear about Coles planning a $1.1 billion expansion of stores over the next three years, building 70 new supermarkets, which is expected to create 16,000 jobs [1]? Half will be full-time retail jobs and the other half will be construction jobs. Maybe they got a scoop on the Retail Trade figures [2], which showed an increase of 1.2 per cent in January, the strongest monthly rise in 11 months!
Also on jobs, The Australian Workforce and Productivity Agency told us this week that 109,000 retail jobs [3] will be created over the next four years.
The Australian economy expanded [4] by 0.8% in the December quarter, which is great news. Add the four quarters together and you get 2.8%, but multiply 0.8% by four and you get an annualized growth rate of 3.2%.
And Chinese Premier Li Keqiang said China set an economic growth target [5] of 7.5% for 2014.
The Week Ahead
Australia
March 11 Tourist arrivals (January)
March 11 NAB business survey (February)
March 12 Housing finance (January)
March 12 Consumer sentiment (March)
March 13 Employment/unemployment (February)
March 14 Lending finance (January)
Overseas
March 8 China Trade (February)
March 9 China Inflation (February)
March 13 China Monthly activity (February)
March 13 US Retail sales (February)
March 14 US Producer prices (February)
March 14 US Consumer sentiment (March)
It’s a big week of indicators locally next week. First up there’s the NAB business survey on Tuesday followed by the Westpac-Melbourne Institute Survey for Consumer Sentiment on Wednesday. It will be interesting to if talk of job cuts over the past month have hit confidence.
Then on Thursday we get jobs numbers and the unemployment rate. Last month the unemployment rate rose to six per cent, so everyone from economists to politicians will be watching the February results carefully.
China figures will also be closely watched – out next week are trade, inflation and monthly activity statistics, and these could have an affect on the Australian dollar and the direction of markets here and abroad.
Calls of the week
In Charlie Aitken’s article this week, he said he believes Seven Group Holdings is on the way to $10 [6]! It jumped 6.25% on Friday!
Joe Hockey this week said the budget will now be “focused on growth”. This is great news and is what I have been calling on him to do for some time. In fact, back on February 24 I wrote: “So, I’m hoping for a pro-growth Budget this year and if needed, the 2015 Budget could be the harder one, though this could be politically harder to pull as the 2016 election would be in the Government’s sights.”
From the left field, Prime Minister Tony Abbott at a timber industry dinner this week called loggers “the ultimate conservationists” and said he will not support the further lockup of forests, and in fact that there are too many locked-up forests in Australia!
What Putin can take away, Putin can give back [7]. News of Russian troops heading into the Crimea concerned markets, which headed down, but when Putin decided to withdraw some troops, the market headed higher!
Food for thought
“The best revenge is massive success.” – Frank Sinatra
Last week’s TV roundup
This week I caught up with Virgin Australia’s John Borghetti for his views on the Qantas debacle and what the Government should be doing to help the industry. [8]
I also spoke with Minister for Small Business, Bruce Billson, about repeal day [9]. The Government plans to remove more than 8000 pieces of red tape for small business. Here’s hoping they achieve that!
Sinclair Taylor from Westpac also joined me on the show to talk about the SMSF Behavioral Report [10] and find out just what makes SMSF trustees tick.
And earlier this week, Paul Rickard and I sat down to talk about the last month in markets and what SMSF trustees should be doing with their portfolios [11], given our outlook for the next few months. You can find out all here.
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. Big movers included Cabcharge and Western Areas (shorts closing), and Bradken and Atlas Iron (shorts opening).
Source: ASIC
My favourite charts
Our chart of the week is from Shane Oliver at AMP Capital and shows that 50% of companies exceeded expectations this reporting season. Oliver says that 66% saw profits rise from a year ago, 64% of companies increased their dividend from a year ago (13% have cut dividends) and 56% of companies have seen their share price outperform on the day their results were released.
Top five clicked stories of the week
Peter Switzer – Could comrade Putin steak away this rally? [12]
Paul Rickard – The Switzer Super Report portfolios in February [13]
Charlie Aitken – Seven Group Holdings on the way to $10 [6]
Rudi Filapek-Vandyck – Buy, Sell, Hold – what the brokers say [14]
Ron Bewley – How to build a portfolio [15]
Last week’s Switzer Super Reports
Monday, 3 March 2014: War, what is it good for? Absolutely nothing. [16]
Thursday, 6 March 2014: All in the family [17]