Switzer on Saturday

I’ve never been so pumped writing this Saturday version of the Switzer Super Report, or what we like to call SSR around the office.

Why the adrenalin?

It’s simple. I’m writing this in the Big Apple – New York City – and have criss-crossed Manhattan all week from Wall Street to the Flat Iron district, across Soho, down to Meatpackers, up to Grand Central Station and even battled the traffic on Fifth Avenue because they were raising the most famous Christmas tree in the world at the Rockefeller Center!

At every stop I was either talking to some of the best US stock market analysts, who have starred on US business television since Foxtel delivered us this great asset, or else superb young and seasoned Aussies, who have made (or are making) it big in the Big Apple.

It has been tiring and it’s a tough job but hell, someone has to do it!

Jobs! Jobs! Jobs!

I couldn’t be writing this on a better day with those irrepressible Yanks, who are holding up the global economy and feeding positivity into world stock markets, reporting this morning that 321,000 jobs were created in November, when the consensus of experts were expecting only 230,000. That’s a big miss and a big wrap for the US economy.

The Dow is up but it should be interesting to see how the market responds because, as Art Cashin (Director of Floor Operations on the New York Stock Exchange) told me on Tuesday, a very good number could bring back talk of an early interest rate rise from the Fed. This could put a lid on the enthusiasm that really should greet this great number.

But it should be good for our market on Monday because it could send the greenback up and our dollar down. Hey, I just thought that if I’m right, my family will either get less Christmas presents from Bloomingdales or it’s going to cost us more! I expect it will be the latter.

Art Cashin

Art has been at the NYSE for 50 years and is one of the best interpreters of Wall Street and what’s bound to happen. The great Australian fund manager, Anton Tagliaferro, emailed me after Art’s interview was aired to tell me how valuable he thought it was, especially on his exit strategy from stocks. Let me give you a quick summary of what Art told me:

He doesn’t overrate US growth for 2015, with 3% his top number.
He watches patterns or “old tracks” and thinks “2015 is ideal for the bulls.”
He says that in over 75 years, in the second-last year of a two-term US president, you won’t find a losing year for stocks.
He even says, amusingly, that years that end in the number five also have a very positive record!
Art thinks we mightn’t see a rate rise in 2015 because he thinks the Fed might have a “how problem” rather than a “when problem” because there’s so much money in the system (see the interview on www.switzer.com.au for his full argument).
He says China might loosen monetary policy soon and that rumour is helping stocks.
Based on history, he expects to hear the jingles of a Santa Claus rally and reminds us that some studies say there are $10 trillion investor dollars on the sidelines that could find their way back to the stock market!
And while he likes the idea that this could be a long drawn out bull market cycle, there are dangers: “You don’t do this for 50 years without looking for where the exit signs are…” But that aside, he’s a bull on stocks for 2015.

Sam Stovall

Sam calls himself a “stock market storyteller” but he’s really MD, US Equity Strategy of S&P Capital IQ’s Markets Intelligence group. He, like Art, has been someone I’ve listened to for a long time.

He largely agrees with Art but here are some of his gems:

He suspects the S&P 500 to be above 2300 by the end of 2015, so that’s about 11% from here.
On the Fed, he thinks the first rise could be later than mid-year to delay the greenback’s rise!
He thinks a correction is needed but it shouldn’t last too long and is unlikely to create a bear market. He points to 1994, when rates rose seven times in 13 months and the market negativity was small.
The gasoline price drop is good news, with every $10 drop in oil said to raise GDP by 25 basis points!
On next year, Sam points out that across the October to October timeframe (just before the mid-term elections and for the year after), the S&P 500 index has been up 17 times out of 17 times, posting a price appreciation of 17%!
(For more go to www.switzer.com.au)

David Darst

David is smart and has been the MD and Chief Investment Strategist for Morgan Stanley. He’s not putting his bull market whip in the wrack just yet either.

He invoked the Sir John Templeton observation to explain where he thought the market was: “Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.” He thinks we’re somewhere between optimism and euphoria, which is something I’ve been arguing for the past year as well.
He adds jobs to lower gasoline prices to housing to car sales and it all keeps him positive but he doesn’t like the overseas vibes.
He says he expects 10% for share prices and 2% for dividends in the US for 2015. Doesn’t that dividend number make us feel lucky, even if our capital appreciation has been disappointing? (David’s interview shouldn’t be missed and once again you’ll find it at www.switzer.com.au)

What I liked this week

Everything – if you’re tired of New York, you need to give up!

What I didn’t like

The GDP numbers but I’ve been warning Joe since March when he started his pre-Budget bleating along with Arnie Kormann. The Budget has hurt confidence and growth and remember, Joe’s a mate but has ignored me, like mates can!
The beat up around income recession. It’s just another take on bad news but I wish the media would sometimes try a twist on good news for a while.

Promise

On Monday, with my SRR piece, I’ll tell you what sector Sam Stovall thinks is a great long-term buy. It will surprise many of you.

What now?

At the time of writing, it’s about 11am NY time. I’m off to a play starring Glenn Close! As I said, it’s a tough job but someone has to do it!

Top stocks – how they fared

The week in review (click the blue text to read more):

I gave you a sneak peak of my market predictions for 2015, and will tell you more when I return from The Big Apple!
James Dunn says you should review your investment strategy and rebalance to get your portfolio into New Year shape.
The oil price knocked around our model portfolios in November but as Paul Rickard explains, our income portfolio still continues to outperform the index.
The brokers upgraded BHP and Fortescue. They also upgraded Beach Energy and Dexus Property and downgraded Aristocrat Leisure.
You were told everything you need to know about the bring forward rule by Kate Anderson.
Charlie Aitken said asset allocation remains key for investing in 2015 and continues to beat his drum on US dollar exposed stocks.
We had double the fun with two Fundie’s favourites this week – one explained why they like Transurban, and the other goes long on Billabong.
Penny Pryor explains why biotech company CSL – held in our model growth portfolio – is looking good after a company announcement. Another stock we’ve mentioned, Sirtex, is also paying off BIG for investors.
And you also got the full run down on lump sums and transition to retirement pensions by Tony Negline.

What moved the market (click the blue text to read more):

The findings of the influential US Fed’s Beige Book, with reports from the twelve Federal Reserve districts, suggested US economic activity continued to expand in October and November. A number of these districts also said their contacts were “optimistic” about future economic activity.
OPEC’s decision to maintain production targets last week continued to rattle the energy sector and the broader market at the top of the week.
Aussie gross domestic product (GDP) rose 0.3% in the September quarter (and 2.7% in the 12 months to September), which was lower than forecasts of 0.7% but still means the economy is doing OK! It does however gives weight to those who say an interest rate cut might be on the cards, like my colleague Paul Rickard (more on this below).
And Aussie retail trade lifted for the fifth straight month, up 0.4% in October.

The week ahead:

Australia
Monday December 8 – Job advertisements (November)
Tuesday December 9 – NAB Business survey (November)
Wednesday December 10 – Consumer confidence (December)
Wednesday December 10 – Housing finance (October)
Thursday December 11 – Employment/unemployment (November)
Friday December 12 – Credit/debit cards (October)
Friday December 12 – Lending finance (October)

Overseas
Monday December 8 – China Trade data (November)
Tuesday December 9 – US Wholesale sales (October)
Wednesday December 10 – China inflation (November)
Wednesday December 10 – US Federal Budget (November)
Thursday December 11 – US Retail sales (November)
Friday December 12 – China monthly data on retail sales, production and investment (November)
Friday December 12 – US Consumer sentiment (December)
Friday December 12 – US Producer prices (November)

Next week will bring a couple of key jobs figures with it and give investors a better idea of how economic growth is heading into 2015. Job ads out on Monday, along with employment figures for November out Thursday, will hopefully reveal some positive trends. The monthly consumer confidence figures by Westpac/Melbourne Institute, out Wednesday, will let us know how sentiment levels have been faring in December.

Overseas, the most important number to look to will be US retail sales for November, and after mediocre Black Friday results, investors will be looking for some more information on the strength of sales. All the key monthly Chinese indicators will also be issued next week.

Calls of the week (click the blue text to read more):

My colleague Paul Rickard was one of the first to make the call that the RBA could cut interest rates early next year and he was quickly followed by Switzer contributor David Bassanese on Wednesday. Westpac chief economist Bill Evans also did a major back flip during the week on his call that interest rates will rise in 2015, and now expects an interest rate cut to occur not just once, but twice, early next year!
Elizabeth Lauten who is a US Republican congressional staffer, posted on her Facebook page that President Barack Obama’s daughters should “try showing a little class,” because in her opinion, they looked bored at last week’s White House turkey pardon. She even criticised the outfits of the girls, who are only 16 and 13 years old! Lauten later resigned over the comments.
Former British Prime Minister Tony Blair released a jolly awkward Christmas card, which caused a stream of humorous comments online! One Twitter made the call; “the strange thing about Tony Blair’s Christmas card is how the teeth seem to follow you round the room,” while another said it was the stuff that nightmares were made of!

Food for thought

Someone is sitting in the shade today because someone planted a tree a long time ago.

– American business magnate and investor, Warren Buffett.

Last week’s TV roundup

Art Cashin of UBS is regarded as one of the best interpreters of the most watched stock market in the world! I went into the beating heart of the world’s financial system, the New York Stock Exchange, to pick the brains of this Wall Street veteran.
With Wall Street hovering at record highs, will the US economy keep growing? All the way from The Big Apple, I interviewed one the brightest brains on Wall Street, Sam Stovall of S&P Capital IQ.
Our local market was in the red for the month of November, with most ASX indices down on the back of collapsing iron ore and oil prices. To provide a wrap of the month that was, where to from here, and exactly how he’s investing right now, Switzer Super Report director Paul Rickard joined Super TV.

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 Paladin Energy, which had its position sold short increase by a whopping 1.51% to 12.62%.

Source: ASIC

My favourite charts:

Oldies opt for online shopping!

Source: NAB

Who said older Australians weren’t tech savvy? According to the NAB Online Retail Sales Index, Australia’s online retail spending increased to $16.19 billion for the year to October, and the growing online retail habits of older Australia’s have helped with this lift! The report says annual growth in online spending for those over 65 has been higher than any other age group (see the dark blue line in the chart above).

Recent Switzer Super Reports

Thursday, 4 December, 2014: All is not lost
Monday, 1 December, 2014: Start spreading the news

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.

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