When I woke up at five o’clock this morning, the Dow was up 198 points and I was caught in a market dilemma. Based on that market reaction, I thought: “Must have been bad news on the jobs report”. However, the rise was at odds with the recent run of economic data and my usually reliable gut feeling.

Of course, I just dismissed what I thought had happened as a rogue statistical number, and that often happens.

In case you missed my mid-week blog on the Switzer Daily website, I pointed out that the worst movie of all time was said to be Santa Claus versus The Devil! (It’s on You Tube if you’re a glutton for punishment.)

But the gripping and best show in town for the next few weeks is bound to be the Santa Claus rally versus the correction, and the latter is winning at the moment and it’s being driven by good news!

Why? It’s simple – good economic news brings the Fed closer to the time when tapering starts, which pushes up interest rates, and that’s expected to create at least a short-term sell-off.

Recall that I have argued that if this happens, it would be a buying opportunity, because 2014 looks good for stocks.

These are crazy times but it looks like they could set us up for the best of times next year, which I’ll look at, in more detail, in Monday’s Switzer Super Report.

But wait, I’m not finished with the news on the US economy. You see, these are crazy times because the jobless rate dropped to a five-year low of 7%, with 203,000 jobs added in November. The experts were opting for 180,000 jobs and a 7.2% unemployment rate, and so this is unambiguously good news that has driven Wall Street up!

And this follows a wild 3.6% economic growth number earlier this week, and overnight, the Thomson/Reuters reading on consumer sentiment came in at a bigger than expected 82.5. On these numbers, Santa Claus looks like he’s coming to town to conquer the correction!

Back in 2008, after Lehman Brothers failed and the Fed and the US administration started constructing their rescue program to ensure the United States avoided causing a global Great Depression, I became incensed at the doomsday merchants, who were unnecessarily spooking investors. Fair dinkum, I couldn’t watch the usually watchable ABC news, whose business commentator scared the life out of me each night – it was wrist-cutting stuff. To me, he and other big name media moneymen had become the Freddie Krugers of economics.

As a consequence, I started a section on www.switzer.com.au called Good News Daily, which actually reported the good news that was being ignored by mainstream media.

Not long after, Sky offered me my daily Switzer program, which went live at 7pm, so I was able to avoid the 7 o’clock news! Someone up there liked me.

One day I might have to create a Bad News Daily for the Switzer Super Report to rail against excessive euphoria. But that’s a way off yet.

Charlie’s super Angels

Bell Potter’s ‘boy’ genius is compulsory super shopping with AMP, Macquarie, BT, K2 Asset Management and Platinum seen as the beneficiaries of compulsory super going to 12%. He restated his steely support for the big iron miners and he’s really fallen off his ‘twig’ for Fortescue. “FMG could easily be on the cusp of everything going right,” he said. He won’t talk up small miners that don’t pay fully-franked dividends, but he thinks Super Retail Group is super! And in his Friday note, he concluded that “I believe markets will now accept good news as good news for cyclical risk assets…”

On Wall Street’s reaction to those job numbers, he got that right.

A great man dies

I heard the saddest news about the death of Nelson Mandela at a time when I was with the funniest people I’ve ever known. It was a Friday lunch with my old radio colleague, Doug Mulray of Triple M fame and his comedy partner, Dave Gibson, who made the characters of Bog Dan the Turnip Boy, Roland Rollerdoor of Roland Rollerdoor’s Rollerdoors and, you might recall, Mr Feimy, who was modeled on Frank Lowy.

Gibson’s impersonations of Mandela were both respectful and funny and I’m sure the Great Man would have laughed along with us at his work. Desmond Tutu was also remembered, though he still lives, in Gibson’s unique way. Gibbo, among many things, was the voice on Australia’s Funniest Home Videos.

On a more serious note, here is my favourite Mandela piece of advice: “As the years progress, one increasingly realises the importance of friendship and human solidarity. And if a 90-year-old may offer some unsolicited advice on this occasion, it would be that you, irrespective of your age, should place human solidarity, the concern for the other, at the centre of the values by which you live.” – Lecture in Kliptown, Soweto, July 12, 2008.

What a man! Long may his goodness live.

Top stocks – how they fared

Numbers that moved the market

It was a big week for economic indicators, with PMI, GDP and a Reserve Bank Board meeting thrown in the mix. The PMI results were:

Australia – 44.3 (on par with October)
USA – 57.3 (up from October’s 56.4)
China – 52.3 (up slightly from 51.8)

AIG’s Australian PMI report didn’t paint a pretty picture of the Australian manufacturing sector, measuring the 10th consecutive month of contractions (a number over 50 indicates growing manufacturing while a number below 50 indicates a contracting sector). Since September 2010 the report has found 23 months of contraction compared to just 5 months of expansion.

It was a similarly sluggish story for National Accounts, which the ABS released on Wednesday. The Australian economy expanded by a sluggish 0.6% in the September quarter, lower than expectations. But at least it expanded – we are now in our 23rd year of economic expansion.

GDP data in the US was also released this week, and it was a different story altogether. Their economy expanded by 3.6 year on year this quarter, (our year on year figure was just 2.3). It’s yet another strong economic indicator for the Yanks, and could mean QE is closer than we think.

If you read the RBA’s interest rate statement last month, don’t bother reading the December one. The release was identical, apart from the following changes:

As Michael Witts pointed out on my show this week, there were only 10 words different month on month in the statement. Try to spot the difference between the two statements here and here.

The week ahead

Last week was a huge one for economic data. This week won’t be quite as hectic, but there is still plenty coming up.

The NAB business survey will be released on Tuesday (the 10th), and it’s expected to show business confidence continue to grow. Consumer confidence, released on Wednesday (the 11th), is expected to be little changed from last month’s 110.35. And on Thursday (the 12th), the ABS will release employment/unemployment figures.

Abroad, the main indicators to look out for are China Trade and Inflation, as well as the US Federal Budget on Thursday.

Calls of the week

Telstra have had a very strong run up, so could now be time to put the stock on hold?

Coles MD, Ian McLeod’s call to put an end to sloppy parking in the Coles car parks. Here are a couple of snippets from his emails, according to news.com.au:

“Could the selfish, inconsiderate team member and owner of a silver Holden Commodore … who believes they are so important that they warrant being able to park their car across THREE SMALL parking spaces, please move it. Could you please also make yourself known to me and explain why you believe that our value of “supporting each other to get things done” does not apply to you?”

When the Commodore moved, two other cars took its place…

“I am appalled two of the small car spots vacated [by the Commodore] have now been filled by a Merc salon and Toyota. Could the owners of these 2 vehicles please … explain to me why parking in these bays was appropriate”

If you’ve been following the advice in the Switzer Super Report this may not be a problem, but even so the Rolling Stones’ ticket prices for their Australian tour were a pretty big call this week. You’ll pay between $198.20 all the way up to $580.45 to get some satisfaction.

Last week’s TV roundup

Charlie Aitken is known for swimming against the current, and in doing so he has become one of the most listened to and read stock pickers in the country. Charlie joined me on the show to talk about his outlook for the stock market in 2014, and to discuss what stocks will lead the way.

10 words were all that separated this month’s RBA rate decision statement from last month’s – which shows the Reserve Bank is comfortable with the way things are tracking at the moment. To find out more, I spoke with the treasurer of ING Direct, Michael Witts.

With the local market down in November what is our sector specialist, Dr Ron Bewley of Woodhall Investment Research, now seeing in his economic crystal ball?

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.

The last few weeks hadn’t seen much movement in major short positions, but it was a different story this week. The biggest mover was News Corp, becoming 1.45% shorter throughout the week. On the other side of the coin, Monadelphous and Boart Longyear both retreated by over 1% which tells us investors could be thinking the worst is over for the two companies, who’s share prices have taken a beating over recent months.

My favourite charts

Top five clicked on stories of the week

Maureen Jordan: Why we are rebalancing the Switzer family SMSF 
Peter Switzer: Rene Rivkin’s tip on making money out of takeovers
Charlie Aitken: It’s all about the cyclicals – JBH, WOW and a Dick Smith float
Ron Bewley: How I’m topping up my energy stocks
Paul Rickard: Portfolios hold ground in November

Last week’s Switzer Super Reports

Thursday, 5 December 2013: Sink or Swim
Monday, 2 December 2013: Takeover tip