Regular readers know I have a healthy respect for the importance to Greece to stocks – they’re important short-term – but in reality my Greek cousins are creating a buying opportunity. The country’s importance is shown by what happened to European stocks on Friday.
Ahead of the referendum the German Dax was off 0.37% the French CAC 40 lost 0.57% and the Spanish IBEX 35 was down 0.61%. So, Europeans are negative about Sunday’s referendum but there is no overreaction. On the vote, I am divided.
As a stock market watcher, I want “yes” to get up to help stocks spike big time next week. A “no” vote continues uncertainty and the usual Greek antics that sidetrack markets. However, as a friend of Greece, I’d like to see the “no” vote get up, the Greek PM Alexis Tsipras be shown to be the liar he is after he told his countrymen that he would secure a new debt repayment deal within 48 hours of the no-vote getting up.
That is BS and it will be proved if the no-vote prevails.
I think the Greeks need to be taken off the support drip they have been on for decades. It needs great leadership. It needs to embrace responsible government policies and it needs to pay its taxes, have a sensible pension system and it has to become competitive. A depreciated drachma would be a part of that story and it needs to stop having one in five employees being public servants and tax evasion has to be clamped down on.
As I have argued before, Greece is 0.3% of the world’s GDP and 2% of the Eurozone’s total production, so it is economically unimportant.
What we have seen this week, with banks closed, ATMs out of money and the world shaking their heads at what is going on in a supposed first world country, would be the greatest incentive for other debtor countries to put on a Greek debt-dodging stunt. I think the contagion argument lacks credibility and Greece’s week of queuing pensioners outside banks and tourists pondering whether they should go ahead with their holiday plans will be a big example for other countries sick of austerity.
What I liked
- Euro zone finance ministers warning on the consequences of a “no” vote, while Greece’s Finance Minster Yanis Varoufakis said he would resign in the event of a “yes” vote, which would be interesting to see.
- The Eurogroup stressed that “no” vote will make discussions
very difficult. Former Greek PM says “no” vote will be first step to leaving the euro. - “The Greek government is rejecting everything with the suggestion that if you vote ‘No’ you will get a better or less tough, or more friendly package. That suggestion is simply wrong,” said Mr Dijsselbloem, who is also the Dutch finance minister. (I hope the no vote forces Greece to grow up!)
- The BBC reported that “In the radical left Exarcheia neighbourhood, exhausted young anarchists lounge outside bars and cafes, and let the banners hanging across the central square speak for them. ‘No to EU and IMF terrorism,’ reads one. ‘€ + Germany = oppression,’ reads another. But note how even the angry Greek anarchist doesn’t have the stomach for the hard work of protesting!”
- This chart which shows why countries like Spain and Italy won;t play follow the Greek:
[1]- The two good trading days this week which is a sneak preview of what lies ahead later this year.
- Our banks rising on good news and they will have a good run this year when good news takes over from Greece and China negativity.
- Australia’s biggest port and rail operator Asciano, getting a $9 billion takeover offer from Canadian asset manager Brookfield. This was a stock we said looked like a takeover target. (Asciano shares soared as high as 20 per cent on the news, finishing up 16.8 per cent to $7.77.)
- US job numbers coming in up 223,000 and while under the 230,000 expected, the unemployment rate fell to 5.3%.
- Also US ISM manufacturing numbers were better than expected.
- And locally most economic data except retail, which was positive but not flash, have come in on the positive side.
- After falling by 0.9% in May, the CoreLogic RP Data Home Value Index of capital city home prices rose by 2.1 per cent in June. Home prices are up 9.8 per cent over the year.
- The official Chinese purchasing manager’s index for manufacturing was unchanged at 50.2 in June. The official Chinese purchasing manager’s index for services rose from 53.2 to 53.8 in June. A reading above 50.0 indicates that the sector is expanding.
What I did not like
- Greece missing the deadline for the repayment of a 1.6 billion euro loan to the International Monetary Fund.
- This from Chris Weston from IG Markets: “If [the yes vote in Greece] doesn’t come to pass it’s likely global markets would face major losses next Monday. You would expect the Australian share market to be down 4 per cent.”
- The Chinese market slide and news that regulators are chasing market manipulators. The 7% fall on Friday adds to the 23% slide in three weeks, which now adds up to 30%. I warned about China but don’t confuse the stock market with the economy – they are related but less so in State-run China.
- Negative views on iron ore this week from expert commodity watchers.
- The Performance of Manufacturing index fell by 8.1 points to 44.2 points in June after rising by 4.3 points to 52.3 in May. A reading above 50.0 indicate
I’m Back!
Yes the trip overseas to cover Greece and to interview the former Assistant Treasurer, David Bradbury who now works for the OECD trying to track down the big tax dodgers of the world, is over. I am back on TV on Tuesday and while I will miss Europe, I will love getting back in my old chair on the Sky News Business Channel.
Two Bradbury revelations are, first, the OECD report comes out in September and should name names on international tax dodging and guess how old David is? Try 39 years of age! You’d have to hope one day he’s is headhunted back by Labor. Even if you are a Coalition supporter, as Greece has shown, Governments need really credible and competitive Oppositions to bring the best out in leaders. That’s probably a lesson we have learnt here over the past few years!
Top stocks – how they fared
[table “91” not found /]The week in review
(click the blue text to read more)
- I explained why our preoccupation with Greece might be blindsiding the bigger worry of China [2]!
- Barrie Dunstan speculated on what investing heavyweight Warren Buffett might be doing next in Australia. [3]
- Paul Rickard told us why bank hybrids are a buy [4].
- James Dunn gave us three marvellous manufacturers [5] – ARB Corporation, Austal and GWA Group.
- Our Super Stock Selectors [6] liked Capilano, NAB, and IOOF, but disliked Fortescue and Metcash.
- Jelena Stevanovic explained why Corporate Travel Management [7] is a first class company.
- Roger Montgomery told us whether there’s an opportunity in IMF Bentham [8], following its recent share price falls.
- Geoff Wilson shared a new global equity LIC with a feel-good factor – The Future Generation Global Investment Company [9].
- The brokers upgraded [10] Healthscope and Independence Group. In our second broker report [11], Bluescope and South32 received upgrades.
- And Tony Negline explained why a recent ATO ruling [12] means small business owners that have used insurance in their super for succession planning need to be careful.
What moved the market
- Market’s everywhere were spooked by Greece defaulting on their debt and the possibility of leaving the Eurozone, but bounced back on Greece’s proposal of a reworked bailout deal.
- The US Department of Labour reported a gain of 223,000 new jobs in June and unemployment fell to 5.3%, the lowest level in seven years!
- Also in the US, the ISM manufacturing data came in better than expected at 53.5 in June, expanding at the fastest pace in five months.
- Employers also added 237,000 private sector jobs in June – the biggest increase in six months.
- And news of Canadian Brookfield Infrastructure Group’s $9 billion dollar takeover bid for Australia’s biggest port and rail operator Asciano.
The week ahead
Australia
Monday July 6 – Job advertisements (June)
Monday July 6 – Inflation gauge (June)
Tuesday July 7 – Reserve Bank Board meeting
Tuesday July 7 – Tourist arrivals/departures (May)
Thursday July 9 – Employment/unemployment (June)
Friday July 10 – Housing finance (May)
Overseas
Monday July 6 – US ISM services (June)
Tuesday July 7 – US International trade (May)
Tuesday July 7 – US JOLTS job openings (May)
Tuesday July 7 – US Consumer credit (May)
Thursday July 9 – US Jobless claims
Thursday July 9 – China inflation (June)
Friday July 10 – Speech by US Fed chief
July 10-15 – China money and loans (June)
Calls of the week
(click the blue text to read more)
- In a televised address, the Greek PM Alexis Tspiras called for citizens to vote ‘no’ to a referendum that will decide whether or not they accept austerity proposals made by creditors last week.
- Justice Richard White awarded Treasurer Joe Hockey $200,000 in damages for defamatory claims published by Fairfax media. $120,000 was awarded for a newspaper poster which read “Treasurer for Sale’’ and $40,000 each for two tweets on the same issue. They were some pricey tweets!
- Authorities were forced to issue weather warnings in Britain after it hit 36 degrees in the UK on Wednesday – the hottest July day on record for over a century! Toughen up guys!
- And my colleague Paul Rickard says that where there is no risk there is no return, and tipped bank hybrids as a buy. Read his analysis here [4].
Food for thought
Problems are not stop signs, they are guidelines
– Robert H. Schuller
Last week’s TV roundup
- Are microcaps too quickly overlooked? For more on the smaller end of town [13], Joel Fleming from UBS Global Asset Management joins the show.
- In the latest Super Sessions [14], we investigate why the Aussie market has been underperforming relative to the US market.
- It was a rough month in June, so we take a look back [15] at how the sectors fared and give our forecasts for July.
- And I ‘skyped in’ to Super TV to talk about what might eventuate [16] from the Greek referendum.
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.
In a tumultuous week for the market, there were many big movers this week! Cardno, Senex Energy, and Mount Gibson Iron all had over 3 percentage point increases in the proportion of their shares sold short.
[17]Source: ASIC
My favourite charts:
One million in 2015?
[18]Chinese tourism is hot in Australia, with a record 901,400 tourists visiting the country over the year to May 2015. Going by that nice trajectory, the number could tip over one million quite soon!
Sydney leads the property boom
[19]Source: CoreLogic RP Data
Over the financial year, capital city dwelling values across the combined capital cities have risen 9.8%. The best performing capital city during this period was Sydney, with gains of 16.2% while the weakest was Perth at -0.9%.
Top 5 most clicked on stories
- Peter Switzer: Is our Greek preoccupation blindsiding the bigger worry of China? [2]
- Paul Rickard: Bank hybrids a buy! [4]
- James Dunn: 3 marvellous manufacturers [5]
- Barrie Dunstan: What will Buffett do in Australia next? [3]
- Rudi Filapek-Vandyck: Buy, Sell, Hold – what the brokers say [10]
Recent Switzer Super Reports
- Thursday, 2 July, 2015: Winner, winner, chicken dinner [20]
- Monday, 29 June, 2015: It’s not all about Greece [21]
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.