I know this might be predictable but all this to and fro over Greece and its debt negotiations with its Eurozone masters is becoming all Greek to me. One moment we’re hearing that talks are progressing well and stocks are up, then negotiations for a “reform for rescue” deal are so ordinary that European markets sell off ahead of Sunday, when a deal is tipped to happen!
Give us a break!
This Greek madness has been going on for basically eight years. While the Greeks have a lot to be criticised for, the smarties in the EU allowed Greece into the Eurozone and ignored many of the problems that now dog the country and all of Europe.
On Friday, in a worrying sign (though I don’t think any Greek signage can be relied upon), the STOXX 600 index, which straddles the important companies of Europe, was down 1.8%! The French CAC lost a big 2.6% and the German DAX was off 2.3%. That said, the STOXX was up 1% for the “sell in May and go away” month.
We weren’t so lucky with our S&P/ASX 200 going from 5790 to where we finished on Friday (5777.2). When you think about how low we went (5574.60 on May 20!), it wasn’t as bad as that old cliché alludes to.
If you think in pictures, the chart below takes you through the ups and downs of the index over the month of May. Considering the lack of good news around, this graphical portrayal of our stock market trading paints an OK story. In fact, anyone needing a bit of comforting about stocks should see my interview with Gary Stone [1]. He thinks the current secular bull market is only two years old and the market’s rise from March 2009 was a cyclical bull market inside a then-secular bear market! As The Beverley Hillbillies’ Jed Clampett might say: “Don’t that beat all?”
[2]But not even Jed would understand what’s going on in Greece! As I said, Sunday is set down by the Greek leadership to have a deal cut with its lenders. That’s what Reuters tells us but in typical post-GFC (or is it post-BC because they’ve been doing this for over 20 centuries), we’re also told that other sources say “a deal was far from imminent!” (CNBC)
This Greek tragedy has special importance for me as I go to Greece next week and we’re currently in negotiations to interview the Greek Finance Minister (dual Greek and Aussie citizen), Janis Varoufakis. If he has something to crow or complain about by June 9, we just might pull off this big play. If we don’t, I’ll spend more time at the Acropolis and on the islands. As the old saying goes: “Beware Greeks bearing gifts”. The packages many Greeks have been carrying lately have probably been euros, with 274 billion euros having been drawn out of Greek banks over the past four months! This madness has to end soon but I have to warn that if the Greeks leave the Eurozone in June, markets will react badly. When uncertainty arrives, smart market players sell first and ask questions later.
What I liked this week
- The 113 point gain over this week for the S&P/ASX 200 index, despite bad construction and business investment numbers.
- Despite those total investment numbers, there were some good omens, with investment outside the mining sector hitting $71.4 billion in the year to March 2015 – the highest result since the year to June 2012. Also, services investment hit a record $63 billion over the past year.
- A net 27% of consumers are positive on their finances for the year ahead, which is the best reading in 13 months and another plus from the Budget.
- The lower dollar, despite my upcoming trip to Greece in search of Yanis. It’s 76.43 US cents this morning so we’ve lost 2 US cents since Tuesday, showing what bad investment numbers have done to rate cut expectations.
- The Dow down only 99 points (or 0.55%), despite a negative GDP number for the first quarter but the weather was blamed. Some would say that if the economy is actually slower than thought, the first rate rise is further away than expected, so let’s buy stocks!
- The consensus of Greek debt experts still think Greece will stay in the Eurozone but it could make for a crazy trip if they leave and we end up using drachmas before we get home!
What I didn’t like
- The second read of the US GDP number came in at minus 0.7% compared to the previous quarter, which was 2.2%. The weather was blamed for this negative result.
- The Chicago PMI had a surprising fall to 46.2 in May from 52.3 in April.
- In Australia, business investment falling by the biggest amount in five and a half years, with plans to invest down 24.6%. While this shows how relevant the Budget’s $20,000 investment carrot for small business is, it’s not good news and not a good sign for next week’s growth number.
- Joe Hockey caving into the tampon tax team on the ABC’s Q&A.
- The SMH headline “Economy darkens” and journos pulling out the R-word. Once upon a time in an era of responsible journalism (a long time ago!), you wouldn’t write ‘recession’ unless the source and data were credible. Seriously, the nearly unheard of economist George Tharenou apparently told his clients that the outlook had switched “from bleak to recessionary” and the SMH jumped on it! The same newspaper didn’t give a front page headline to the surge in consumer confidence after the Budget, despite the biggest lift in eight years and the index going to a 16-month high! Anyone would think that Fairfax thinks its newspaper business will do well if it helps to create a recession! God, give me a break!
Quote of the week came from Justice Brereton (at the Gina Rinehart court case) who said Bianca Rinehart was a “feisty and wary witness” but not dishonest. She also sported a billion dollar smile!
[3]Top stocks – how they fared
[table “79” not found /]The week in review
(click the blue text to read more):
- I gave you the most important questions to ask yourself [4] when the market is driving you nutty.
- James Dunn told you how seven super blue chips are faring [5], including the likes of CBA, BHP and Westpac.
- Paul Rickard explained the pros and cons of investing in a new listed investment company [6], Argo Global Infrastructure.
- Our Super Stock Selectors [7] liked Origin, Magellan and Telstra, but turned their noses up at Oroton and Fairfax.
- Ausnet is an excellent utility option for your portfolio [8], according to Investors Mutual founder, Anton Tagliaferro.
- Charlie Aitken says “Buy Macau casinos [9]’’ and NOT to play China through Australian resources stocks.
- Geoff Wilson dubbed Blackmores, Eclipx Group, Smartgroup Corp and Mayne Pharma Group as four standout stocks in a fully priced market [10].
- The brokers [11] upgraded AGL Energy and downgraded James Hardie. In our second broker report [12], Coca-Cola Amatil and Westpac were upgraded.
- Penny Pryor gave the low down on an upcoming IPO [13] for insurance related company, Greenstone.
- And using a subscriber query as a case study, Tony Negline explained the best way to structure your SMSF [14] if you’re the sole member of the fund.
What moved the market
- Aspiring nickel miner Sirius Resources soared 66 cents, or 20.4%, to $3.90 after it received a $1.8 billion takeover offer from gold, nickel, zinc and copper producer Independence Group.
- Lower than expected Aussie capex figures, with business investment falling by 4.4% in the March quarter.
- A collection of good news in the US, which ramped up speculation that the Fed will raise rates sooner, rather than later.
- And ongoing ‘Grexit’ worries spooked Europe.
The week ahead
Australia
Wednesday May 27 – Construction work done (Mar Quarter)
Wednesday May 27 – Speech by Reserve Bank official
Thursday May 28 – Business investment (Mar Quarter)
Friday May 29 – New home sales (April)
Friday May 29 – Private sector credit (April)
Overseas
Tuesday May 26 – US Durable goods orders (April) }
Tuesday May 26 – US Home prices (March)
Tuesday May 26 – US Consumer confidence (May)
Tuesday May 26 – US New home sales (April)
Tuesday May 26 – US Richmond Fed survey (May)
Thursday May 28 – US Pending home sales (April)
Friday May 29 – US Economic growth (March Quarter)
Friday May 29 – US Consumer sentiment (May)
Calls of the week
(click the blue text to read more):
- Ireland made the call to legalise gay marriage in a historic referendum [15], with 62% of votes in favour of the change.
- US authorities sniffed out corruption at the football governing body of FIFA, with seven officials arrested in Zurich [16]. European football Chief Michel Platini made the face-to-face call for FIFA president, Sepp Blatter, to step down.
- After a long game of family feud [17], the Supreme Court appointed Gina Reinhart’s estranged daughter, Bianca Reinhart, as trustee of a multibillion-dollar family trust. Ironically Gina Reinhart just topped BRW’s latest ‘Rich list’, so that ranking might be given another look!
- And if you missed it, Steve price gave Gen Y a talking to and told them to stop complaining [18]!
Food for thought
A dog will teach you unconditional love. If you can have that in your life, things won’t be too bad.
– Actor, Robert Wagner
Last week’s TV roundup
- Paul Rickard shared five essential super tasks [19] to think about before the end of the financial year.
- Shadow Treasurer Chris Bowen spoke about Labor’s take on superannuation and the GST [20].
- Prime Value’s ST Wong shared his favourite stocks [21].
- And I’d also like to introduce a new project we’ve been working on at Switzer [22] – Mad About Money, with Peter, Paul and Marty.
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 Dick Smith, with its short position increasing by 1.32% to 8.58%.
[23]Source: ASIC
My favourite charts
Healthy home building
[24]Residential building rose by a healthy 4.8% during the March quarter and is up 11.4% over the year.
Consumers are happy consumers!
[25]
Despite consumer confidence easing by 1.0% in the week to May 24, might I remind you that we reached a six-month high in the week following the Budget, with the rating rising by 3.6% to 114.6! As you can see by the chart above, consumer confidence remains at levels above the long term average (red dotted line).
Top 5 most clicked on stories
James Dunn: 7 super blue chips [5]
Peter Switzer: The questions YOU have to ask [4]
Penny Pryor: Super Stock Selectors – Origin, Magellan Financial and Telstra [7]
Geoff Wilson: 4 standout stocks in a fully priced market [10]
Paul Rickard: What you need to know about an investment in toll roads and power stations [6]
Recent Switzer Super Reports
- Thursday, 28 May, 2015: Xie Xie China [26]
- Monday, 25 May, 2015: Silver linings playbook [27]
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.