From the SMH comes an interview with Sean Fenton of Tribeca Investment Partners:
“Many parts of the market are purely bottom-up focused and in some market environments you can get away with that,”…About a year ago Fenton took a favourable view on companies with US earnings because the prospects for the world’s biggest economy looked better than where Australia was heading. “That’s a pretty simple way of making money – by recognising the macro environment,” he explains. As for the downturn in the currency, once commodity prices started sliding “the direction was never in doubt.”
On iron ore:
“In particular what’s apparent is Chinese steel demand has most likely peaked out,” he says. On the iron ore supply side, the majors have “committed a fair bit of price destruction…That’s obviously got big implications for Australia in terms of how it impacts our growth, how it flows through the broader economy. Certainly there’s a shift in growth away from the west coast back to the east coast but the big question is the multipliers and the hit to income …whether we end up in recession.”
And Australia:
The dynamic of having domestic demand at risk but ebullient investment markets and a hot property sector put the Reserve Bank of Australia in a tricky position. “To an extent they’ve been cornered a little bit by events beyond their control…Otherwise I think they’ve been probably a little bit over-committed to not interfering with market forces and late to the game in terms of macroprudential regulation [of the housing sector]…They could have done more to cut rates and get the currency down.”
And yield:
At odds with the outlook for commodity prices and earnings risk in the materials sector, he is seeing yield investors move in to the big miners for, of all things, income. “Almost the definition of an overextended market is when yield investors start buying mining companies,” he says.
Too right. What is so bizarre about bottom up analysis (that is, stock picking) is that ignores one entire half of the possible returns in investment via asset allocation.
