Friday the 13th came five hours early for me with my Thursday Switzer program on the Sky News Business channel attacked by a gremlin in the computer system, so my show didn’t happen! And worse still, I was in Melbourne to do the program, after interviewing Myer’s Bernie Brookes after he reported a 8.7% dip in profit to $127.2 million.
Bernie blamed costs and a big depreciation bill after the company went on a capital-spending spree. And while the media ripped into the result, I got the feeling that the CEO wouldn’t be surprised to see a turnaround coming.
Tennis with Gerry
When interviewing Bernie, I told him that I played tennis with Gerry Harvey last weekend. I mentioned to Gerry that my mate, Professor Ron Bewley, had mentioned on my TV show that there was technical evidence that the Aussie consumer was starting to make a comeback and reduce their high savings rates. In his inimical and laconic style, and between points, Gerry simply said: “Your friend is right.”
On hearing this, Bernie added that he agreed with Gerry.
I like what I’ve seen this week on the economy, with nearly everything at medium- to long-term highs. Proof?
- Home loans at five-year highs.
- NAB business confidence at a 27-month high.
- Consumer Confidence at a three-year high.
- Chinese industrial production at a 17 months high.
- Chinese retail sales the best in eight months!
Want more? Well, on Tuesday, Craig James pointed out that the All Ordinaries Accumulation Index (AOAI) was nearing record highs. “The AOAI hit 5½ year highs yesterday and is 2.1% below record highs” he said.
Adding to my optimism, I have to ask what happened to the spookiest month of all, September, on the scariest day of the year, Friday the 13th?
The yanks are coming
Well in the USA, the Dow was up 3.04% for the week — the best week since January and a strong close into the end of trade, with the index up over 75 points.
This was a good effort, with tapering expected to be coming next week but the market expects it to be small, though if stocks slide — it’s a buying opportunity!
Commentators think headline risk is reducing, and that’s despite tapering ahead, the Congress and debt/deficit challenges and a German election on September 22.
Global highs
If you need international proof of optimism, have a look at the stock market results from around the world this week:
- S&P 500 up 1.98%;
- China up 4.5%;
- Japan up 3.9% and;
- Germany up 2.8%.
We were up 1.45% but I think there’s more in store for us next week.
Reflections on 2013
Looking at this year, there has not only been plenty of good market news, there has been a lack of bad news.
“Sell in May and go away” hasn’t worked this year, with our market up a bit over 1% and, for the year, we’re up 12.1%. And that’s before you throw in dividends — so let’s call it 16% for pre-retirees and 18% for smart retirees in the no-tax zone!
For stock watchers: here’s Charlie’s Angels
Bell Potter’s Charlie Aitken says these stocks were made in heaven: Qantas, Crown Resorts, STW Communications, Telstra, Technology One, JB Hi Fi, Boral, QUBE and Caltex.
Hanging out with the tourist — Angelina Jolie!
On Thursday, I couldn’t believe my eyes in the airport lounge, when I spotted Angelina Jolie, who’s here to make a movie. As I was heading to Melbourne to interview Bernie Brookes, I’d taken a few copies of our magazine, RUSSH, a highly regarded young women’s fashion mag, to give him.
I couldn’t help myself, so I went up to Ms Jolie, introduced myself, welcomed her to Australia and gave her a gift of our latest edition. She looked at the magazine, examined it, smiled graciously and thanked me. The only thing I regret is that I wasn’t gross enough to ask her for a ‘selfie’ — maybe I’m not prime ministerial material!
Pre-election insight on Abbott
And on that subject, I have to share this little encounter just before the election. The scene was outside the Sky News studio and Julie Bishop was talking to Alan Jones, after an interview on Richo. As I went by, I said to Ms Bishop: “I hope this old leftie didn’t go too hard on you?” They both laughed and then Ms Bishop continued talking about Tony Abbott’s ability to bring a team together. She was clearly impressed by his team leadership, which has been surprisingly free of controversy, even given that Barnaby Joyce is in the squad!
In response I said: “So he’s good at pastoral care?” And she came back with: “Yes, he would have made a good priest!”
Jokes aside, if Abbott can keep this unity and common purpose with his team, then the country could be in for some good government. Clearly, this was the greatest failing of Labor and it’s what they must work on over the next three to six years.
Economically, politically and market-wise, the goodies are outweighing the baddies, which makes my optimism for 2014 look well placed!
Top stocks – how they fared
[1]Numbers that moved the market
Unemployment [2] rose to 5.8% in August, up from 5.7% the month before. To put that in real terms, there are currently around 714,100 people looking for work! The last time unemployment was above this level was 10 years ago in August 2003. The participation rate also moved the wrong way, falling to just 65% – its lowest level in 6 years. See my favourite charts below for more.
Consumer confidence [3] jumped to 110.6 in September in the lead up to the expected Abbott election victory. It’s the highest consumer confidence has been since 2010 and is a decent jump from the 105.68 figure from August. (We had a discussion in the office yesterday to figure out the difference between consumer confidence and consumer sentiment. The answer [4] – different names for the same thing!)
NAB’s survey of business confidence [5] told a similar story, with the index rising 9 points in the month of September to a final reading of 6. The last time business confidence was this high was in 2010. I hate to say I told you so, but I told you so!
The good news wasn’t only coming from Australia – data out of China [6] on Tuesday showed industrial production rose 10.4% on last year and 0.7% on last month.
The week ahead
Australia
September 17 Minutes of Reserve Bank August Board meeting
September 17 New car sales (August)
September 18 Speech by RBA Assistant Governor
September 18 Alcohol consumption (2011/12)
September 19 Reserve Bank Bulletin
September 19 Detailed employment data (August)
Overseas
September 16 US Industrial production (August)
September 17 US Consumer prices (August)
September 17,18 Federal Reserve meeting
September 18 US Housing starts (August)
September 19 US Existing home sales (August)
September 19 US Leading index (August)
September 19 US Philadelphia Fed index (September)
On Tuesday we’ll have the minutes from the RBA’s meeting from the beginning of the month – not hugely exciting this month after the RBA did what they were widely expected to do and left the cash rate at the current brilliantly low level of 2.5%. However, it may provide some clues as to whether they took the question of further cuts off the table.
Out of the US, we will see August Industrial production on Monday night. Analysts are expecting a rise of 0.3% in production – peanuts compared to Chinas result this week but a rise none the less. The US Federal Reserve commences a two day meeting on Tuesday night (our time).
Calls of the week
Greg Fraser told us in this week’s report that there is still plenty of growth to come from the mining industry. On Monday [7] he did some digging on Rio and liked what he found.
After the huge run-up we’ve seen on the ASX200 it’s time for the little guys to have a go. Small caps, which have uncharacteristically been lagging the ASX, will soon be back with a vengeance, says Paul Rickard [8].
With the election done and dusted there’ll be slightly fewer opportunities to take the micky out of our pollies. The stand-out call from last weekend was Rudd’s call to drag his rockstar-esque concession speech on for over 20 minutes!
Last week’s TV roundup
Julia Lee [9] from Bell Direct joined me to analyse the stocks worth playing as we ride out this post election bounce.
Lance Lai [10], our King of Charts, returns to the show to tell us where our stocks and investments are headed. Last time he hit the nail on the head with the Shanghai Comp, Gold, S&P500 and the ASX 200 – today he tells us what’s in store around the corner.
Everyone loves a stock tip, especially when it comes from the brilliant Roger Montgomery [11]. Roger joined me on the show this week to highlight a few stocks which he says are beneath their intrinsic value, and worth looking into.
Favourite charts
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, both Transfield Services and Atlas Iron powered into the top 20 – they are 8.15% and 7.97% short respectively. Despite improving slightly this week, Fairfax remains the stock with the most percentage of shares sold short for the fifth week running.
[12]The Banks
In June I told subscribers [13] I was getting into banks and recommended you all do the same. Here’s how the big 4 have done since then (I bought in on the orange vertical line – the 25th of June). NAB has done the best at 13.9%, ANZ only 6.4%.
[13]‘Favourite chart’ is probably a bit of a stretch for this one, but it does give a good visualisation of the current employment situation in Australia. 40.8% of Aussie adults (from 18 yrs to 65 yrs) are currently not in the work force – 714,100 of those Aussies are not there by choice.
[14]One stat many people don’t seem to understand is the participation rate. This number refers to the percentage of Australians between 18 and 65 who are either working or gainfully seeking employment. As displayed above, today this is 65% (59.2 + 5.8).
Last week’s Switzer Super Reports
Thursday, 12 September 2013: Back to the future [15]
Monday, 9 September 2013: Under new management [16]
Top five clicked on stories of the week
James Dunn: Seven top yield stocks [17]
Greg Fraser: Stock in focus – Rio Tinto [7]
Peter Switzer: A new government and Gerry’s four words [18]
Paul Rickard: Is it time for small cap stocks? [8]
Rudi Filapek-Vandyck: Buy, Sell, Hold – what the brokers say [19]