It’s raining jobs, takeover targets and Joke of the Week

Well blow me down — Wall Street went higher on a miles better than expected jobs report that has now brought the prospect of tapering from April to possibly December! Of course, the Yanks still have to navigate through the tricky Congressional waters, with their debt and deficit impasse to come to a head again on December 13. And yep, the 13th is a Friday!

For the record, the economists were expecting 125,000 new jobs in October, especially after the government shutdown, but 204,000 showed up! Before the close, the Dow was up three figures and this defied expectations that good job news would be bad market news, as the bringing forward of QE3 tapering would raise interest rates and the greenback and hurt economic growth in the short-term. However, it was also expected that the market would eventually shoot up on the recognition that the tapering is telling everyone that the US economy is getting stronger.

And true to form, as the US dollar went up, our local currency slipped to 93.86 US cents, which will make the RBA Governor, Glenn Stevens, smile. (Incidentally, I bumped into Glenn at the Rupert Murdoch speech for the Lowy Institute, and despite my crusade against the RBA’s interest rate strategy, the Governor still was willing to talk to me and his wife was very gracious, which probably means she doesn’t watch my TV show!)

The four-legged lottery

On the subject of Switzer TV, I hoped you watched it on Monday night as I ran through my Cup tips from Tom Waterhouse, Westpac’s chief economist Bill Evans, who not only can do the form on the economy but also on the sport of kings, and yours truly.

All of us were on Fiorente’s back and Bill even tipped Mount Athos in his three selections!

By the way, Paul Rickard and I have looked at Gai’s “Living the Dream” prospectus, and while it could be interesting for a dyed-in-the-wool punter, we did not see it as an investment opportunity, to put it nicely. It’s a punt and a cheap way to be a small-time owner, but if you’re thinking about it, do your homework!

Takeover targets

During the week, I interviewed Beulah Capital’s Tom Elliott on my Switzer program, so the interview is on the Switzer Daily website (www.switzer.com.au). Tom thinks Bega cheese is now in play, so after being the stalker, it’s being stalked, with Kiwi Fonterra taking 6% of the cheese maker. And that’s not expected to be the last bite.

The takeout lesson taught to me by the late Renee Rivkin was that you can usually get on board a hostile takeover bid, with the first bid generally not ending up being the last.

This all started with Bega Cheese trying to become the country’s ‘big cheese’ by snaring Warnambool Cheese & Butter.

Charlie’s Angels

The Bell Potter now maturing ‘wunderkind’ has Macquarie priced at $60 by Cup time next year. It’s now $54.56. He continues his ‘un-Australian’, bank de-bashing, pointing out that Westpac’s 13-month dividend looks like 8.2%, grossed up to 11.7% for retirees in the beloved no tax zone!

He pooh poohed the correction is coming chorus, which I questioned this week, and argued his 6000 mark for the ASX 200 by mid year could show up earlier than he thought.

FN Arena’s Rudi Filapek Vandyck and Professor Ron Bewley are less positive on the index in the first half but both of these respected market watchers are heavily driven by analysts’ views, so it’s Charlie versus the analysts. But what’s new? Unsurprisingly, he’s banking on the CBA hitting $80, which is looking probable nowadays, especially with the Yanks buying stocks on good jobs news, and the prospect of tapering starting earlier than expected! He wrapped up the week marching to the beat of the SMSF drum, arguing that some stocks that these super trustees will chase could be stronger for longer because they’re SMSF stocks. I think you know what he means.

One out of TEN for Fairfax

The Fairfax earnings report was not promising and while CEO Greg Hywood did extol the virtues of his journalists, it’s ironic that the owner of the highly regarded business newspaper — the AFR — can’t actually do business. If things don’t pick up soon, chairman Roger Corbett will have to start shopping around for a new gig.

Wake up to a bad start

Meanwhile over at TEN, it’s new and expensive breakfast show had such a bad start that its whizz kid executive producer, Adam Boland, walked out! The poor guy, who masterminded Sunrise’s breakfast dominance, has had a low audience response with Wake Up. He has also had some personal challenges, so we wish him well. I do like some of TEN’s new management team but the name of that show possibly says it all.

Joke of the week

An investment banker dies and gets told he’s off to hell. As he’s passing through purgatory on the way to this place of eternal damnation, he spots an economist he knows having a very intimate conversation with a gorgeous woman. So the businessman says to his escort: “How come I’m going to hell and that economist is having such a great time here with this beautiful woman?” To which the escort replies: “Who are you to question her punishment?”

Top stocks – how they fared

Numbers that moved the market

US GDP had another solid gain this quarter, with the economy expanding by 2.8% after 2.5% the quarter before. It’s the 10th quarter of back to back growth, with the last contraction occurring back in June 2011.

On Thursday night, Super Mario (otherwise known as Mario Draghi, President of the European Central Bank) surprised the market by lowering interest rates. In Australia our current record low interest rate is 2.5% – over in Europe they are currently sitting on 0.25%. Yes, that decimal is in the right spot. http://www.ecb.europa.eu/press/pr/date/2013/html/pr131107.en.html

And of course there are some all important numbers from the Melbourne Cup:

$90 million was wagered on TAB’s NSW and Victorian Totes
The biggest bet on the day was $40,000 on Fiorente at $7.
One punter put $10 on a first four mystery bet and came away with $50,000
And my favourite: the Victorian punter who bet $1 on the first four in the correct order and took home $118,652

The week ahead

Australia
November 11 Housing finance (September)
November 11 Remembrance Day
November 12 Lending finance (September)
November 12 Credit card lending (September)
November 12 NAB Business survey (October)
November 13 Wage price index (September quarter)
November 13 Consumer sentiment (November)
November 13 New car sales (October)

Overseas
November 13 US Federal Budget (October)
November 14 US Trade Balance (September)
November 14 US Productivity/Labour Costs (Sept quarter)
November 14 US Senate Banking Committee
November 15 US Industrial production (October)
November 15 US Empire Manufacturing Index (November)

After a fortnight of big economic indicators, we’re set to calm down this week. Things are looking up for the economy post-election, and the numbers due out are expected to reflect that.

The NAB business survey has seen confidence rise over the last two months. It’s at a current 3.5 year high and is expected to rise again on Tuesday (12th). Consumer sentiment on Wednesday (13th) will be interesting as it will provide an insight into our reaction to last week’s interest rate decision.

There’s not much going on in the US this week either. The October budget figures will be issued on Wednesday, Trade Balance comes out on Thursday, and industrial production figures are released on Friday.

Calls of the week

First call of the week goes to the three out of the 70 economists Bloomberg surveyed who predicted the European Central Bank would cut rates last week.

Tom Waterhouse’s call on the Melbourne cup – he put Maureen and me onto a winner!

Twitter’s call (or misscall?) to price their IPO at $26 a share – on their first day of trading, the stock rose 80%!

Paul Rickard’s call that Channel 9 is not all it’s hyped up to be. Read the story here.

Last week’s TV roundup

Following up on his article in the Switzer Super Report last week, James Dunn joined me on the show to talk about his five stocks under 50 cents.

Christopher Joye is back on the show to follow up on our housing bubble debate from September.

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.

This week hasn’t seen much movement as far as short positions go. JB Hi-Fi has been creeping its way down the table over the last few months. In July it was around 18% short, and this week it has come all the way back to just 7.40%, suggesting investor confidence has returned to the stock.

My favourite charts

In contrast to many online companies who go public, Twitter had a massive first day on the market. The chart below shows how Facebook, LinkedIn and Yelp all performed over their first 3 months on the market. What did Twitter do differently?