By Chris Becker
Earnings season winds down on the local market, but all eyes are on Fed Reserve Chairman Ben Bernanke’s speech later tonight, so its been a mixed day on Asian markets. The ASX200 finished in the green – but only just – up 0.43 of a point to 4316 – I’ll take a closer look at the bottom of the post for a full roundup including technical analysis of the bourse itself.
The Nikkei 225 fell 1.6%, probably on the back of some pretty bad industrial production numbers, although unemployment remains steady and “low” at 4.3% whilst the Hang Seng is off by about 0.4% a little more than the Shanghai Composite which is down only 0.2% with other mainland Chinese markets having scratch days.
The Aussie battler (AUD/USD) has moved nowhere again during the Asian session, still at 1.03 although it is finding some bids as we go into the European session, as does the Euro/USD currently just above 1.25, as the US Dollar Index continues to consolidate above 81.6 points.
Gold (USD) is trading in a wide range and is currently at $1657 an ounce, but in AUD terms the story remains one of strength, for now, just under $1610AUD per ounce
Australian Stocks
Its the end of the month and the quarter, with the ASX200 up 1.1% and 5.4% respectively at close of trading today. Continuning the statistics (remember, there’s lies, damn lies and statistics), over the year the ASX200 is up just over 6%, but the All Ordinaries Accumulation Index – which reinvests dividends – is up just over 11%! Maybe buy and hold isn’t dead after all? Just kidding. It’s dead and buried. Time in the market can mean the same as “time in the slammer”. Lost time forever.
Why? Because you would have lost nearly 5% each year since investing in the All Ords Accumulation from the peak in 2007 – add inflation to that figure and its not a pretty sight. Let’s make it more realistic and say you invested three years ago as the reflation rally in 2009 was underway and “everything was fine” – your annual return is 3% – about the same as most fund managers too. I guess they don’t teach opportunity cost anymore at business school either, but they still seem to teach EMH…
If you had invested at the peak in late 2010, you would have lost nearly 6% per annum – that includes dividends too – and if you believe inflation is running at 2.something % (probably more like 4-6% in the real world), again, do I have to ask you again why you are using buy and hold? Buy and hope more like it.
Sorry I have a bee in my bonnet about this sort of stuff. Back to what happened today. Staples were bid, mainly because of Woolworths (WOW) climbing 1.4%, as materials stocks took a breather, although Newcrest (NCM) continues to get pummelled down nearly 3% again today:
On to the index – not much to report here, it could as easily go back up through 4400 points or down to 4200 points come Monday morning as the “risk” world reacts to Ben Bernanke. I have said from time to time before that risk management is what matters here, not getting it right. I’ve dialled back a lot of my own (and Macro Investor) positions leading up to earnings season and the macro events surrounding. Not a time to have a lot of directional plays on – except iron ore of course. But again, that’s in the laps of the Dogs as well.
Have a good weekend and keep safe, see you all on Monday.
These daily updates need to be placed in context with the longer trends and drivers amidst the overall technical picture, where Former “Trading Week” readers will find it reborn as “Technicals“, published 8.30am each Monday morning.
Chris Becker is an investment strategist at Macro Investor, Australia’s leading independent investment newsletter covering stocks, trades, property and fixed interest. Each week Macro Investor publishes tables on the top ten most undervalued and overvalued stocks on the ASX. A free 21-day trial is available at the site.
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