[table “100” not found /]
It’s been a great week for everyone with stocks and, in fact, it’s been a great month, though the news hasn’t been good for Bronny Bishop and poor old Adam Goodes! (More on this later.)
I love a good week for stocks as it means the ‘experts’, who think my guarded optimism is misplaced, stop sending me Apocalypse Dow stories, blogs and tweets. This is the way a commentator gets treated in the world of commentary, as Adam has found out. Everyone’s a critic and once you try to influence people in the public domain, you have to be ready for a backlash!
Again, more on that later. Let’s concentrate on what’s happened on the stock market and what lies ahead.
Over the month of July (which brought madness to the market via Greece and China), we saw the S&P/ASX 200 index spike 210 + points to see the index finish at 5699.2, up 133 points for the week and 240 points for the month (or 4.3%).
June cost us about 318 points, May took 13, April 101, March 37 and we had to go back to February for some positive news when we went up around a big 340 points. So have we turned the corner?
It’s clearly a guess but I like Credit Suisse’s near-term call of 6000 for the S&P/ASX 200 index, even if they have pulled it back from 6500. Macquarie’s Martin Lakos came with a positive message for the market on my show on Monday. Even though there are some curve balls coming such as:
- when will the Fed raise rates?
- how big a sell off will it create?
- will it affect our market unduly?
- can Beijing beat the stock market sellers?
I remain running with the bulls, even if it’s at a sedate pace.
Next week should add a new, interesting chapter to the drama that is the stock market both here and abroad. Reporting season gets more serious here while the Yanks will still be playing show-and-tell with their corporate stories.
Meanwhile, the economic revelations will be important. Here we have home prices, job ads, the RBA rates decision, retail and the latest unemployment reading. Overseas, there’s the China PMI and the US economic snapshot concludes with the all-important jobs report.
The news next week is going to make someone like me very excited!
What I liked
- The stock market’s sterling effort this week proving to me that provided external events don’t rock markets, we can see stocks trend up despite volatility.
- BIS Shrapnel’s chief economist, Frank Gelber – a very good economist – has our economy improving gradually over the next two years, until it takes off in years three and beyond. A lower dollar will be a big help but it makes for rising stock prices, if Frank is right and he often is!
- Commodity price movements this week and the share market response of BHP and Rio.
- Even though I like lower oil prices for the cost, profit, economic growth and inflation effects (I do have energy stocks in my portfolio), I liked this from FXCM’s chief currency strategist, John Kicklighter (that’s got to be a make up name but I like it!): “In commodities, energy prices received a boost when Saudi Arabia indicated it might trim production after summer, and after the US Department of Energy reported a sharp drop in inventories.” (AFR)
- The $A at 73.11 US cents and reports that it’s going lower. This, of course, will make the OS investment strategy and buying local companies that earn most of their income overseas still real goers.
What I didn’t like
- The call from Westpac’s Brad Cooper to limit super to a cap of $2.5 million! Why is a bank suggesting this? This will be worth watching.
- Seeing the terms of trade fall to a 7-year low in the June quarter, off 5.7%. I expect this as the mining boom peters out but I still don’t like seeing it.
- Dwelling approvals fell 8.2% in June, driven by a 19.5% drop in apartment approvals but these are lumpy figures and shouldn’t spook you too much (Gelber’s view on construction in Sydney and Melbourne in the commercial/industrial space was very positive).
- This from Clarkson derivatives dealer to Bloomberg on the better iron ore prices this week, which got over $US55 a tonne: “The rebound will be short-term and lower prices are expected. We have an oversupply market.” (Gina Rinehart’s Roy Hill mine’s output won’t help!)
- Ex-Goldman guy and big call merchant, Raoul Paul, who publishes the Global Macro Investor, is tipping the US dollar index to spike 20%! This will hurt commodity prices and could choke US as well as global growth. That would not be good for our economy, our BHP shares and the dollar would be heading towards the 50 US cents region! It would eventually create growth for us as our non-mining economy grows better on a lower dollar but there would be some really confronting adjustments and that BHP dividend, now over 6%, just couldn’t last. Let’s hope he’s wrong but I will be investigating.
Two other things I didn’t like
Good God Bronny! Why did it take you so long to deal with that mystery meeting and delayed apology? This will give Labor something to go mad about next week when Parliament resumes but fortunately it shouldn’t distract business and consumers, where confidence is on the rise.
If you’re anti-Bronny and plan to work beyond 70, I should remind you that no pollie worked harder to make sure you get paid your compulsory super, which used to cut out after that milestone.
The Adam Goodes affair is also a huge nationally divisive event fed by the media. As a Swan’s supporter, I liked it when Adam kicked the goal and kicked his hateful boo’ers with his spear-throwing antics but he had to expect a comeback when you take on a crowd of mug footie fans. Sure, some will be racist but most are just anti-Swans and fans of Adam’s rivals.
Being in the commentary game, I learnt a long time ago if you want to put it out there, you will cop it back.
I hope Adam gets back to footie and keeps up his political stance if he needs to (and I think he does) but he has to get used to the counterpunches. I also learnt a long time ago that opinions are like bums – everyone’s got one! There’s a more colourful word I could use for ‘bum’ but it is a bit coarse!
Now let’s get back to making money on the market and go the Swans!
Top stocks – how they fared
[table “99” not found /]The week in review
(click the blue text to read more)
- I told you whether China is just a stock shocker, or a BHP booster [1]!
- Tony Featherstone told you how to buy into the staggering potential that is, the “Internet of Things [2]’’.
- Paul Rickard gave you the best loans for buying property through your SMSF [3]. He also explained why Westpac’s new hybrid [4] (ASX Code: WBCPF) will be well supported.
- Our Super Stock Selectors liked BHP [5] as a medium- to long-term play.
- The brokers liked CBA and Westpac [6] and in our second broker report for the week, Beach Energy got the green light [7].
- James Dunn gave you the rundown on who will surprise this earnings season [8].
- Charlie Aitken told us why, at these prices, there could be value in China [9] for the contrarian investor.
- Roger Montgomery explained why there is still value in the tech giant [10] we all know and love: Apple (NSDQ: AAPL).
- And Tony Negline explored why it’s important to consider strategies to grow your partner’s super [11].
What moved the market
(click the blue text to read more)
- The US Federal Reserve kept its interest rates at near-zero percent but left the door open for a rate hike this year [12]. “…it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labour market and is reasonably confident that inflation will move back to its 2% objective over the medium term.”
- Spot gold continued to fall, closing the week at US$1,085 per ounce.
- The Shanghai Composite Index went for a bumpy ride this week, with China’s industrial profits declining 0.3% year-on-year in June.
- Markets also moved higher on the back of a modest recovery in commodity prices during the week.
The week ahead
Australia
Monday August 3 – CoreLogic RP Data home prices (July)
Monday August 3 – ANZ Job Advertisements (July)
Monday August 3 – TD Securities Inflation gauge (July)
Tuesday August 4 – International Trade (June)
Tuesday August 4 – Retail Trade (June)
Tuesday August 4 – Reserve Bank Board Meeting
Thursday August 6 – Employment/unemployment (July)
Friday August 7 – Housing Finance (June)
Friday August 7 – Statement on Monetary Policy
Overseas
Saturday August 1 – China Purchasing managers (July)
Monday August 3 – US ISM Manufacturing Index (July)
Monday August 3 – US Construction Spending (June)
Tuesday August 4 – US Factory Orders (June)
Wednesday August 5 – US ADP employment (July)
Wednesday August 5 – US Trade Balance (June)
Friday August 7 – US Non-farm payrolls (July)
Calls of the week
- AMP Bank made the call to freeze investor loans until late in 2015 (and also increased existing loans to investors by 47 basis points) in response to the guidelines handed down by APRA to curb growth in investor lending.
- Foreign Minister Julie Bishop lobbied for a UN-backed tribunal into the MH17 plane crash, but Russia vetoed the proposal.
- Adam Goodes decided to take some time away from playing for AFL team, the Sydney Swans, due to the controversial and ongoing jeering from spectators.
- And Communications Minister Malcolm Turnbull stuck it to Bronwyn Bishop this week by live tweeting his train trip from Melbourne to Geelong – which shows you don’t need a chopper to go places!
Food for thought
You miss 100% of the shots you don’t take.
– Wayne Gretzky, former Canadian ice hockey player and coach.
Last week’s TV roundup
- Adam Muston, ETF capability manager at UBS Global Asset Management, explains why exchange traded funds remain so popular [13].
- Jas Khara from Boson Managers outlines the opportunities available in two growth momentum sectors [14] – India and global healthcare.
- In this Super Session we explore the main features of hybrid securities [15] and where to find them.
- And Nick Griffin from K2 Asset Management talks about their company’s brand new fund [16] on the Australian stock exchange.
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 Orica with 1.92% of its ordinary shares sold short to 16.32%. Next was Slater and Gordon, with a change of 1.12 percentage points to 11.37%.
[17]Source: ASIC
My favourite charts
Bumpy ride for Shanghai stocks
[18]Source: Yahoo!7 Finance, 31 July 2015
The Chinese stock market hit some turbulence this week, sliding over 8% on Monday – the biggest drop in eight years!
TPG larger than life… and Coca-Cola!
[19]
Source: Fairfax Media (BusinessDay), Bloomberg
Who would’ve thought it – but TPG Telecom’s market cap now stands over $7 billion, and that means it’s now bigger than the likes of Fortescue Metals and even Coca-Cola Amatil! Not bad for a company that had a market cap of less than $3 billion just two years ago.
Top 5 most clicked on stories
- Peter Switzer – China – stock shocker or BHP booster? [1]
- James Dunn- What companies will surprise this earnings season? [8]
- Tony Featherstone – How to buy into the staggering potential of the ‘Internet of Things’ [2]
- Penny Pryor – Super Stock Selectors – BHP for the thrill seekers [5]
- Charlie Aitken – Don’t fight Beijing [9]
Recent Switzer Super Reports
- Thursday, 30 July 2015: The power of the Middle Kingdom [20]
- Monday, 27 July 2015: China doll? [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.