How bad is this bourse? Iron ore is through the roof. Trump tax cuts are pouring rocket fuel on a US stock boom with S&P futures through roof:
AUD is down for the same reason:
Yet the ASX is about as energised as Mr Creosote’s scrotum, opening flat and sinking as the morning goes on:
Big Iron is up on the price and Citi upgrades but gains are very modest in the circumstances:
Key changes are iron ore to US$64/t, from $53/t, Met Coal to US$155/t from US$133/t, thermal to US$78/t from US$73/t, manganese to US$5.10/dmtu from US$4.13/dmtu, Copper to US$3.22/lb from US$2.91/lb, aluminium US95c/lb from 92c/lb and Alumina to US$360/t from US$340/t.
Expect 2018 to be a year of consensus upgrades and very strong free cash flow generation. If we continue to see disciplined capital allocation amongst a lack of projects and viable M&UA target, the free cash flow should come back to shareholders.
We prefer the diversifieds (BHP, RIO, S32) as we expect they will deliver cumulative free cash flow US$56 billion over the next three years on our commodity price deck, with further upside to US$70 billion at spot commodity prices.
Nothing can stop the killing of pensioners:
The real culprit is Big Sleazy which is not enjoying the RC:
Big Anus is mixed:
If I had to guess I would say foreign capital is fleeing these corrupt shores. In fact, here it is, from Bloomie:
Japanese investors are falling out of love with Australia’s currency and bonds as the South Pacific nation’s economic growth slows and its yield premium vanishes.
Funds in Japan bought a monthly average of 38 billion yen ($443 million) of Australia’s debt this year, down from 49 billion yen in 2016 and 53 billion yen in 2015, data from the Ministry of Finance show. The value of Australian dollar-denominated mutual funds sold to retail investors slid to a one-year low of 2.81 trillion yen in October, from as much as 5.45 trillion yen in February 2012, according to the Investment Trust Funds Association of Japan.
“Investors won’t be enthusiastic as Australia’s economy is not strong enough for the Reserve Bank of Australia to raise interest rates repeatedly,” said Eiichiro Miura, general manager of the fixed-income department in Tokyo at Nissay Asset Management, which oversees the equivalent of $US94 billion ($123 billion). “Uncertainty about the banking system surrounding China is another area of concern when you think about Australia.”
“You really can’t treat the Aussie as a high-yielding currency any more,” Murata said. “There’s an impression that the Aussie rose quite significantly after the Lehman crisis, but purely looking at the yield levels now with the US, there’s no reason to be aggressive about buying the Aussie.”
Indeed, this helps explain the under-performance of both banks and miners.
I don’t see why you should be stuck holding the bag.
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David Llewellyn-Smith is chief strategist at the MB Fund which is currently long local bonds and international equities that offer superior growth and benefit from a falling AUD so he is definitely talking his book.
Here’s the recent fund performance:
Source: Linear, Factset
The returns above include fees and trading costs on a $500,000 portfolio. Note that individual client performance will vary based on the amount invested, ethical overlays and the date of purchase. The benchmark returns do not include fees. October monthly returns are currently at 4.9% for international and 4.2% for local shares.
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The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. The MB Fund is a partnership with Nucleus Wealth Management, a Corporate Authorised Representative of Integrity Private Wealth Pty Ltd, AFSL 436298.
