Find below the contents page of the past week’s Macro Investor report for you to consider a 21 day free trial subscription.
Macro Investor Volume 1, No 8
MACRO: Running with the Draghi put
- Risk, Europe and equity markets are running with an enthusiasm that would impress even the crowds at Pamplona.
- Nonetheless, investors will need much more than Mario Draghi’s mooted monetary policy to succeed beyond the rally.
- Uncertainties remain and though technical indicators on the market look promising, for the economy they look ominous.
DATA: Chinese data, leading indicators down
Advertisement
- Latest data is largely weak, with domestic inflation and global activity particularly a worry.
- ABS unemployment and housing finance provided bright spots, but no panaceas.
- Chinese trade data, notably exports, meanwhile point to slowing aggregate global demand.
TECHNICALS: Watch those wedges
- Remember, remember, the woes of September – and the returning traders from holidays.
- Two major reversal patterns spotted in two major markets.
- Australian stock market is looking very bullish, next few weeks will decide rest of 2012.
Advertisement
Stocktake
- Earnings season is underway and we include a full valuation update on the 25 stocks that reported this week.
- The sideways bear market on the ASX200 continues, with prices above next year’s estimates of value.
- Consensus earnings and price targets continue to be tightened as economic reality meets the market.
CBA
Advertisement
- Beyond the record profits and strong dividend, CBA is a stock facing negative macro headwinds.
- As the bank nears FARM’s $58.52 valuation, just above resistance, further upside is limited.
- Once ex-dividend today we expect CBA’s share price to fall. Better blue chips lie elsewhere.
NAB
- NAB’s flat quarterly result was largely attributed to higher funding costs in the UK.
- But while bad and doubtful debt charges have decreased, risks rise in its core market of Victoria.
- As Victoria’s property market and economy in general face pressure, NAB will bear the brunt.
NCM
- Brokers love to say NCM is cheap and are now pointing to a positive FY12 in support of this idea.
- Yet on our estimates its still too expensive and furthermore its technical position remains ugly.
- While we think that risk may yet come on again for gold there are better exposures elsewhere.
TRY
Advertisement
- While many gold miners remain dear in a sideways market, TRY stands out for value and growth.
- With record production on high margins, TRY is very profitable even if gold prices fall significantly.
- Sovereign risk is high and market condition remains bearish, but if gold breaks out so will TRY.
Trades update
- Earnings season continues its curving, twisting path through market volatility but few trading opportunities have been generated.
- Instead, profits continue to be taken on many Australian share trades, and risk management processes tightened.
- The MacroTrades model portfolio is up 4.8% since inception – a wonderful achievement considering we’re only using 5% of our portfolio.
Trading earnings season
Advertisement
- Trading during corporate earnings season is fraught with risks and sleepless nights.
- Reacting to new trends rather than foretelling possible breakouts can provide lower risk and higher rewards.
- Three potential new trends in companies who have already reported are a case in point.
Gold with a silver lining
- The gold price continues to move sideways, but support is rising on monetary stimulus hopes.
- Gold’s companion precious metal silver is not as bullish, with a bearish medium term technical outlook.
- A hedged pair trade on the presumption of a breakout or breakdown in either side could thus be suitable.
Advertisement
The pros and cons of Sydney housing
- Sydney’s under-performance in the last few years has seen its house price premium falling to levels not seen since the mid-1980s.
- Sydney housing is now looking good with relatively strong foundations, including tight supply, solid yields, and above-average jobs growth.
- Recently-announced supply-side reforms could, however, be a potential game changer, hurting both values and rents.
Prices update
- R.P.Data weekly price movements
- On a 12-month basis, national aggregates remain in a downtrend, but with significant divergences between capital cities.
- Capital city home prices have now fallen -5.8% since values peaked in October 2010.
SPECIAL REPORT: China stimulus or rescue?
Advertisement
- Chinese history offers vivid examples of strong leadership forcing through massive political reform, social change and economic projects when the need requires.
- It’s uncertain however whether China’s Politburo currently feel that need or, if they do, whether they have the necessary tools at their disposal.
- Most of all however, if stimulus was launched, just how many funds would need to be diverted to rescue the debt-addled projects that stimulus wrought in the first place?
FIXED INTEREST: Opportunities in rates confusion
- Competing views on the direction of interest rates are hard to reconcile; will rates fall, rise or do both?
- It’s a conundrum that highlights a belief that the RBA moves rates due to global uncertainty rather than Australian data.
- This is a fallacious however, as there is a rationality to rate setting. The question remains however: what is it and what to do?
Advertisement
CLASSROOM: Financial advisors and you, a love story
- One of the most important investment decisions you will ever make won’t be what to buy or sell, but who to ask.
- The financial planning and advisory industry doesn’t always have your best interests at heart.
- Still, good advisors do exist and sometimes even the most seasoned investor needs a little professional help.
MODEL PORTFOLIO:
Advertisement