Williams’ new book, Woolies: take a look and good news still the hook

Founder and Publisher of the Switzer Report
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Looking back on the week and trying to work out what it means for our investments, you can’t forget Qantas’ $2.8 billion loss and its share price rising 6%, Russian troops crossing into the Ukraine and stocks still going up on Wall Street, or not getting dumped. At home, this week of reporting season disappoints slightly. Our economy, however, continues to improve.

And even overnight, with an hour to go before the closing bell at the New York Stock Exchange, the British PM added to the spook factor with his warning that led to the UK Telegraph leading its website with “Isil terrorist ‘highly likely’ to attack UK, warns David Cameron…”. Against that however, the Thomson Reuters/University of Michigan consumer sentiment reading was a better than expected 82.5. This follows the consumer confidence take by the Conference Board, which rose this month to nearly a seven-year high.

As investors, these geopolitical concerns could make the next two months volatile. Throw in the fact that we see the US stock market at all-time highs and our market at around six-year highs adds to the potential volatility. But I liked two standout things this week.

First, all my experts see there’s at least two years left in this bull market, provided no real black swans sail into the economic/market picture. At the moment, I guess we’re seeing ‘grey swans’, as the Ukraine and Middle East issues are seeable and therefore less shocking. September 11 and Lehman Brothers disappearing were shocks of a very black proportion!

Second, Lance Lai’s charts (which have had a very high accuracy tendency), and his commentary, which included a more bullish view on China following his most recent visit there, where he hung out with some of the wealthiest entrepreneurs in the world. To be more correct, Lance was negative on China until this trip, so it’s a significant turnaround (more on this below).

What I liked and learnt this week

My week began laying around the pool in the Pullman Cairns International hotel – I know it’s a tough assignment but someone has to do it! Working as always, I was reading a book by former News Corp Australia boss, Kim Williams, as I interviewed him on Tuesday (this interview will be shown on my program during the week and Kim’s book is called Rules of Engagement).

(I headed north not to just read the book! I did a speech at the Australian Liquor Stores Association conference. My market tip from that experience is that Woolies has a bottler with Dan Murphy’s. Its rep at the conference, Martin Smith, was an impressive retailer.)

Though Kim had his challenges at Holt Street – the home of News – he shot the lights out at Foxtel, which was losing $3 million a week when he took over in December 2001. When he left, it was the most profitable media company in the land.

Apart from informing me that the machine haters of the industrial revolution – the Luddites, who ended up in incarceration in Tasmania, (which I guess has significance to his battles with the world of print), the book was a great read. I’ll be looking for companies where the leadership follows the “trend line” of what consumers want, not the “headline” that might have worked in the pre-digital age.

I did ask him if he held media stocks and he did not say ‘yes’ in a strongly supportive way. Neither do I, as this is an industry facing huge change, so you’d only buy these stocks for speculation.

In brief, I liked:

    • US economic growth was revised up from 4% to 4.2% in quarter two.
    • Macquarie is not retreating on its positive outlook for China.
    • Master of the market, Anton Tagliaferro telling me he likes two of my TV guests – S.T. Wong of Prime Value Asset Management and Lance Lai with his charts (Fund managers of Anton’s history can be hard judges).
    • Legendary Wall Street technical analyst, Ray Acampora reacting to the scary 50% market crash call of analyst Abigail Doolittle, by arguing aggressively that the charts simply don’t support her call (it could with a pesky black swan and it might in more than two years’ time but with interest rates where they are, it’s too early a call).
    • Chris Hyzym, the chief investment officer at U.S. Trust, who told CNBC that we’re into the fifth year of a 20-year bull market! (Whatever he’s on, I want some. It makes my ‘two-year and I will be nervous call’ look so wimpy.)
    • Private Sector Lending here rose by a healthy 0.4% in July after a 0.7% rise in June. Annual credit growth rose from 5% to 5.1% – the strongest growth in over five years (another good sign for my bullish call on the Oz economy over the next year).
    • The dollar falling below 93 US cents on weaker Chinese data but we ended the week over the 93-level.
    • Cairns at 27 degrees by the pool! Bring on summer, which should also bring a Santa Claus rally.

Top stocks – how they fared

Numbers that moved the market:

The S&P 500 index closed above 2,000 points for the first time ever on Wednesday!

The Chicago Fed National Activity Index (CFNAO) – a good economic indicator as it is drawn from broad categories of data like production, income, employment, personal consumption etc – rose to +0.39 in July from +0.21 in June. This means that the US economy is expanding at an above average rate of growth.

And Australia’s private new capital expenditure rose by a stronger than expected 1.1% (seasonally adjusted) in the June quarter.

The week ahead:

Australia:
Monday September 1 – RP Data-Rismark home prices (Aug)
Monday September 1 – Monthly inflation gauge (August)
Monday September 1 – Business Indicators (June Quarter)
Tuesday September 2 – Building approvals (July)
Tuesday September 2 – Current Account Balance (June Qtr)
Tuesday September 2 – Reserve Bank Board meeting
Wednesday September 3 – Economic growth (June quarter)
Wednesday September 3 -Speech by RBA Governor
Thursday September 4 – Retail trade (July)

Overseas
Monday September 1 – China Purchasing Managers index
Tuesday September 2 – US ISM Manufacturing Index (August)
Tuesday September 2 – US Construction Spending (July)
Wednesday September 3 – US Auto sales (August)
Wednesday September 3 – US Beige Book
Thursday September 4 – US Trade Balance (July)
Thursday September 4 – US ADP employment (August)
Friday September 5 – US Non-farm payrolls (August)

We’ll be kicking off Spring with a plethora of economic data next week. Monday starts with an ABS publication that captures our broader economic health quite well – Business Indicators – and we will also see how inflation is trending, with the monthly inflation gauge released by TD Securities and the Melbourne Institute.

The Reserve Bank is also in the spotlight, with the Board meeting in Adelaide on Tuesday to discuss all things interest rates, and there will also be a speech by the RBA Governor, Glenn Stevens on Wednesday. Of course, our gross domestic product (GDP) figures for the June quarter, along with retail trade figures for July will also let us know if our economy is paddling along nicely.

There is also a lot happening overseas next week, and some of the more important events on the US agenda includes the ISM Manufacturing Index on Tuesday and the Federal Reserve’s Beige Book on Wednesday night our time, the latter showing the economic conditions across 12 Fed districts. The week finishes on Friday night with the big one – the US Non-farm payrolls report for August.

Calls of the Week:

Our charts man Lance Lai is on team market melt-up like yours truly! He says the charts have indicated we could get to 5,995 by the years end – I’ll forgive him for being 5 points shy of my call, because I like the fact that an accountant can be this positive!

Charlie Aitken added another company to his ‘’high-conviction buy list’’ when he tipped Westfield Corporation as a “strategic portfolio manoeuvre” in this week’s Switzer Super Report. Find out why.

And Paul Keating chose to criticise more than what’s “below the belt” this week after he recalled the days when former Prime Minister Bob Hawke sunbathed in the nude, even when Cabinet ministers would pop around…

Food for thought

“I came from a family who believed in, in quotes, the Rights of Man, who believed that in order to justify the sort of luxurious life that the majority of us have, related to the whole world, that you had to do something”

– British director and actor Richard Attenborough, who sadly passed away at age 90 this week.

Last week’s TV roundup

Lance Lai from Accountancy Invest, the man whose technical charts have told us much about our investment futures, is back!

NIB’s full-year net profit increased by 4.3%, or $72.4 million, but claim costs had also rocketed skyward for the health insurer. This week, NIB’s Managing Director, Mark Fitzgibbon, joined me on Super TV to discuss the results.

And this week I spoke to the former Deputy Prime Minister and Treasurer – Wayne Swan – about his book The Good Fight and some of the economic themes it covers. He also outlined what challenges lie ahead for Australia’s wealth, and why he’s fed up with so much negativity about the current state of the economy.

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 the biggest mover was UGL, who had its position short sold decrease by almost 4% to 7.71%. Bradken Limited (BKN) went the other way, with its position sold short increasing by 2.91% to 10.44%.

Source: ASIC

My favourite charts:

Consumers are starting to forgive Joe Hockey!

I like that confidence levels are sitting back above the running average since 1990, and have taken a nice turn since that massive blip after the Budget was released in May!

Go you good thing!

Source: Accountancy Invest

Here’s the chart Lance Lai presented on my show this week, which shows that the ASX 200 could ride all the way up to 5,995 this year.

Online shopping is very, very popular

Source: eWay

Floristry and Catering are the industries leading the way in the online realm, with sales growing 253% and 252% respectively from July 2013 to July 2014.

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