It’s Black Friday in the US and it’s not December 13 – that comes next week – which means the Yanks will get two Black Fridays in two weeks! No, this is not a calendar freak out. It’s just that in America the day after Thanksgiving signals the start of the festive shopping season and that’s when retailers, after a year of being in the red, start to go into the black.
And in a number of Walmart stores, some US shoppers literally shopped until they dropped, with fights breaking out over discounted items in at least four outlets and there was a stabbing in the car park in Claypool Hill, Virginia!
Black Friday is followed by Cyber Monday, where the Thanksgiving online sales go sky high. Why, on a workday, do these sales rocket? That’s easy. Shoppers do their best buying online for their private purchases on the boss’s time on a faster computer! That said, with smart phone shopping increasing at a rate of knots, Cyber Monday could become a less important indicator going forward.
Early shopping signs were positive but the Dow finished down 10.92 points at 16,086.41, though the New York Stock Exchange (NYSE) finished three hours early so traders could join the stampede.
Thanksgiving also marks the start of the Santa Claus Rally season and I need one of those to see my prediction of the S&P/ASX 200 at 5500 come about. By the way, this was made at the start of the year and, unlike others who have constantly upgraded their forecasts, this has been my stick-my-neck out call since January. If I miss, I won’t lose much sleep, as I only make these calls to give my subscribers, viewers, listeners and readers an idea of where I think stocks are heading. Trying to pick the exact index level at year’s end is a game even a mug wouldn’t play.
Luck of the Kiwis
On the subject of play, you have to take your hat off to those damn Kiwis, whose All Blacks side got out of jail by beating the Irish in a Rugby Test last weekend.
The two teams have played each other since 1905 and Ireland has never won – 27 losses and one draw – and they were ahead 22-7 at half time and got dusted on the bell to lose 24-22! In the process, the Kiwis became the first team ever, since the professional era, to win all Tests in a calendar year and congrats go to them. But what about this AIG ad? This has to be the irony of the century!
Thanks to Marcel Von Pfyffer of Arminius Capital for spotting this one. He pondered whether this was a joke.
During the GFC, these guys were bailed out by US Federal Reserve and Treasury, after insuring $US441 billion of credit default swaps. This would have been the greatest bankruptcy of all time, if the Fed didn’t stump up an $85 billion bailout in 2008! The total rescue ended up being $182.3 billion but the company paid back a total $205 billion! If AIG had gone down, we would have seen a Great Depression. Remember these numbers if anyone whinges about the debt the world now carries.
That said, if I were AIG, I wouldn’t do any advertising that talks about losses. Quiet pride might be the best way to go!
Charlie’s Angels
It was Aitken in Asia last week and after hightailing it back from his Asian investment strategy tour, Charlie was talking down the Aussie to US80c sooner than most think! He’s upping the stakes and rolling the dice on Crown and his Asian followers were anti our department stores because of the arrival of FMFGs – “fast moving fashion groups”, such as Zara, Top Shop and H&M, which could be structurally changing the shopping experience forever! In contrast, his Asian cohorts had Woolworths on their shopping list, despite the slowness of Masters to build a foothold. And he was pedalling Suncorp on the basis that, if it demerges insurance from the banking business, it could be an $18 stock again! He sees this as a medium term possibility!
The joke’s on who?
I know a lot of my ABC mates were not happy with The Australian revealing their salaries but it does remind me of that famous headline: “Man Bites Dog.” The media and the ABC have participated in teasing bank bosses and other executives for excessive salaries or payouts. As I write, the Sydney Morning Herald has told me that some guy from GM Capital is on $380,588, which was a rise of 14.5%, which means he’s on about $25,000 more than Q&A’s Tony Jones!
More irony
I loved this from Crikey I have to say: “Former ABC managing director, David Hill, has backed calls for the salaries of the broadcaster’s presenters to be made public - a move many staffers oppose as an unnecessary invasion of privacy.”
That’s rich from a group, and I include myself, that spends a lot of their working life invading people’s privacy!
I have to confess I only invade people’s privacy if I can help investors make some money out of it.
Top stocks – how they fared
Numbers that moved the market
Services PMI for the USA [1] bounced sharply last month, showing a strong increase in business activity. At 57.1 in November (up from 49.3 in October), it was the sharpest rise since March 2012.
The result was also reflected by the amount of Americans claiming unemployment benefits [2], which fell by 10,000 this week. It is the 6th fall in 7 weeks.
RBA Deputy Governor, Philip Lowe, gave a speech [3] this week on the drivers, measurement and trends of productivity, yet neglected to mention the dollar. The currency fell slightly after Lowe’s presentation.
Capital expenditure rose [4] by a seasonally adjusted 3.6% on last quarter, which was a good sign for the economy. In Macquarie Bank senior economist Brian Redican’s words “this data is probably as good as you could have hoped for”.
The week ahead
Australia
December 2 RP Data-Rismark home prices (November)
December 2 Business Indicators (September quarter)
December 2 Performance of Manufacturing (November)
December 2 TD Securities inflation gauge (November)
December 2 Building approvals (October)
December 3 Reserve Bank Board meeting
December 3 Balance of Payments (September quarter)
December 3 Retail trade (October)
December 4 National Accounts (September quarter)
December 5 International trade (October)
Overseas
December 2 US ISM manufacturing (November)
December 1, 2 China PMI manufacturing (November)
December 4 US ISM services (November)
December 4 US ADP employment (November)
December 4 US Beige Book
December 5 US GDP (September quarter)
December 6 US Non-farm payrolls (November)
Plenty of action coming up this week, with a number of key economic indicators on both sides of the Pacific. In Australia the week kicks off with PMI figures released on Monday. Other economic indicators to look out for locally throughout the week include data on inflation and building approvals (also on Monday), the Reserve Bank’s final board meeting for the year (no rate cut expected), and National Accounts (expecting growth of around 0.6% – 0.8%).
Abroad and it’s a similar story, with heavy hitting data in both the US and China. At the start of the week it will be all about manufacturing. ISM will publish its report for the US, while in China both the official Government as well as HSBC PMI figures (which are often contradictory) are also released.
On Thursday the 5th, US GDP figures are released (CBA’s Craig James is tipping growth of 2.8%), and on Friday non-farm payrolls are out.
Calls of the week
Plenty of good calls this week, first of all from the Organisation for Economic Cooperation and Development. They say there’s more to life than the cold numbers of GDP and economic statistics (how dare they!), so they developed the Better Life Index [5], which takes into account economic, social, environmental and a number of other factors to find the best country to live in. Results were out this week, and Australia came in on top of the list!
In the wake of Michael Clarke’s “Get ready for a broken f—ing arm” sledge in the first Ashes test, Clarke and Dawe (that’s John Clarke, not Michael) gave a terrific introduction of things to come. Well worth the watch [6].
Rivers’ call [7] to sell their business to Specialty Fashion Group for just $5 million.
Joe Hockey’s call [8] to rule out a full foreign acquisition of GrainCorp. Archer Daniels Midland, the US grains giant interested in the coup, can increase their current 19.85% stake to just 24.9%. The move will be good for Liberals/Nationals political relations, but risks upsetting free market advocates and the business sector.
Arthur Sinodinos [9] this week assured trustees that SMSFs are safe and that the government is on our side. On an unrelated note, he also said, “don’t underestimate how clever [Clive Palmer] is”.
Last week’s TV roundup
With the property market heating up, the million dollar question is: should I take a fixed or variable home loan? I spoke with Rohan Gamble [10] from mortgage comparison site mozo.com.au, to find out what the best options are.
PM Capital has been a smart performing fund business, and soon one of its funds will list on the ASX. To understand why the business has drawn a lot of positive attention, investment analyst Uday Cheruvu [11] (who wrote our Fundie’s Favourite [12] last week) joined me on the show.
With strong economic indicators and three historically good months coming up, you’d be forgiven for expecting the market to continue to surge. But we’re in backwards times where good news is often seen as bad news, because a strong economy means QE tapering is closer. To find out what’s going on, I caught up with Michael McCarthy [13] from CMC Markets to ask, do you feel lucky, punk?
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’s chart is almost a spitting image of last weeks, with only a few minor changes amongst the top short stocks.
My favourite charts
Size does matter
Paul Rickard pointed out to a subscriber this week [14] that our market run-up has been primarily lead by large cap stocks. Looking at the below chart, we can assume the gap will close eventually – but does that mean the big stocks will go down or the small ones will come up?
Count your blessings
It’s no secret that the high dollar isn’t doing any favours for business, but looking at a 12 month chart puts things in perspective. We’ve come a long way from the start of the year.
Top five clicked on stories of the week
Peter Switzer: Reliable dividend-paying stocks you might not own! [15]
Maureen Jordan: Why we are rebalancing the Switzer family SMSF [16]
Paul Rickard: Set your kids up financially … for life – Part 2 [17]
James Dunn: Why you need to add some agriculture [18]
Charlie Aitken: QBE a buy on QE tapering [19]
Last week’s Switzer Super Reports
Thursday, 28 November 2013: Don’t go changing [20]
Monday, 25 November 2013: Good things come in medium packages [21]