Macro Afternoon

See the latest Australian dollar analysis here:

Macro Afternoon

Stock markets are inflating fast as the lack of any connect with reality and a weaker USD sends them careening back to their overvalued pre-COVID19 valuations. The technical recession in Australia was celebrated with the Aussie dollar almost reaching its start of year high while Brent futures shot through the $40 level on more OPEC+ maneuvering.

In mainland China, the Shanghai Composite looks set to finish with another small lift higher by 0.2% to 2927 points, while the Hang Seng Index rose 1.3% to 24301 points. This takes price almost back to the previous sideways highs from April and still well above previous firm support at the 23300 point level:

Japanese share markets were the standout again with the Nikkei 225 up another 1.3% to 22325 points, continuing its epic, extremely overbought condition, helped along by a weaker Yen. The USDJPY pair is maintaining its blowout position here at jsut below the 109 handle and looks set to re-engage even higher tonight:

The ASX200 had the best session of them all as traders celebrated the recession news with a near 2% lift to 5941 points as the Aussie dollar also went gaga with the daily chart showing how close its getting to the pre-pandemic level just below the 70 cent level. Everything is awesome!

Eurostoxx futures are on fire, up 1.5% or so with S&P futures up at least 0.5% as there’s absolutely no reason to short US stocks. Apart from the looting, the looming civil war, the likely postponed/cancelled elections in November, the careening economy and debt load and the not even finished first wave of coronavirus. BTFD!

 

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Comments

    • Arthur Schopenhauer

      Beat me to it!

      UK may ask Australia to give residency to fleeing British Hong Kong residents
      https://www.theage.com.au/world/europe/uk-may-ask-australia-to-give-residency-to-fleeing-british-hong-kong-residents-20200603-p54yws.html

      As of 24th February 2020, there was 349,881 holders of BN(O) passports and the UK Home office estimates that there are around 2.9m BN(O)s in Hong Kong.
      https://en.wikipedia.org/wiki/British_National_(Overseas)_passport

      Maybe the Australian Gov could do a deal in exchange for basing a sizeable portion of the Royal Navy in Brisbane, Adelaide or Perth.
      https://en.wikipedia.org/wiki/Astute-class_submarine

    • but what if they are fleeing in boats?

      edit: and unable to get their money out.

      • DominicMEMBER

        This.
        In the minds of many though, they’ll be escaping with all their wealth (er, property) intact. Wheeee ….

        I remember footage of the myriad military coups in Africa, back in the day. Europeans, leaving behind of their wealth, their homes, their farms and heading back to Europe with little more than the shirts on their back. Maybe a few had some $ stashed abroad but a lot was left behind and lost forever.

        Will be South Africa too, eventually.

    • Excellent – that should drive up the high end property markets in the absence of Chinese buyers.

    • happy valleyMEMBER

      SFM will be salivating – the property and population ponzi to the moon, without him having to lift a finger and with all that lovely HK money to be laundered and recycled. The local primary school will soon be 100% Asian, with the high school also just about there. How good is Straya.

    • Dr Evil: “how about no Scott”

      This is ridiculous. Every time there’s some kind of conflict in the world Australians rush out to say “omg bring them here” and give no thought to the consequences.

      Only ones that benefit from this will be Hebrew Harry and his developer mates. Everyone else suffers, we import more ethnic clashes between HK and China and the CCP gets to plant a few more spies among the mix.

      Not our problem.

    • No one’s going to read this because it’s too late. But
      1) there’s 100,000 Aussie expats in HK anyway.
      2) the ones who want to leave won’t be the ultra-rich or even the upper-echelon; middle class HK sure. They have a bit of money stashed away, but not millions/billions.

  1. “The technical recession in Australia was celebrated with the Aussie dollar almost reaching its start of year high..” – best ever.

      • lol – ok let’s see how this plays out. I am still of the view that China will not do same kind of stimulus they did in 2016. Surely they would have learnt something.
        But then again I’ve been wrong in the past.. many times, even though I am good at picking stocks as you may have noticed.

    • DominicMEMBER

      Markets only react when there’s a surprise – the only surprise may have been that the hit to GDP wasn’t deeper.

  2. anyway not being able to read where things may go I exited all NCM (traded my way out with minimum losses), day-traded RRL and sold more ALK in order to collect more profit.
    Wait and see pattern for me now.. or perhaps I should short the poo.

      • DominicMEMBER

        Those are gold stocks. Different story entirely.

        Getting into gold at any price right now will see you sitting on large gains over the next 5yrs.

    • I’m looking at RRL, SAR and NST as medium term holds….a hedge if you will…

      Have a feeling that at 2 and a half thousand AUD an Oz, these miners are going to have some serious cash to splash on dividends in years ahead. and if eventually the stock market catches up with fundamental reality, then your in the box seat!

      • same but it’s scary right now. I only hold 60k ALK – that’s it. If this thing goes off there will be another massive margin call – at least that is what I think and count on.

        • you mean another 35% leg down? With all that Fed $ sloshing around ? I think that if corona virus and US riots combined cannot even make the market level out there is not much chance of a huge leg down … in a few months it could all change though…

          • I don’t know. I share your view but looking at what market is trading now while almost no one makes any money and all that debt piling.. I just don’t have the confidence to have my money in equities right now.

        • DominicMEMBER

          I’m sitting on big gold exposure and thinking there will be a good size correction but wondering whether I’ve missed the short-term top already. Keen to sell 20-30% and hope to get back in lower. Hoping it spikes over the next week or two and then I’ll cut some positions. Otherwise just sit tight.

          There is growing evidence that investors are getting nervous about the money printing and thinking maybe just a bit of exposure to gold would be good. If (when) this view takes gains traction, gold (and miners) will set course for Mars. I really don’t wanna be sitting on too much cash when that happens.

          • and the only reason why I still hold few ALK. But, in the meantime, if markets start falling again there is a chance of another massive margin call that can overwhelm demand. If it plays out it will be very short lived as buyers will eventually come on top so plan is not to wait too long wondering where bottom is. I am not going to hesitate to get early suffer some paper losses initially.

      • SupernovaMEMBER

        except for the 47,000 June gold contracts stating for delivery via the COMEX

    • Well, daily new covid cases in Brazil jumped back up to 27,263… for 2 June.. Still on an uptrend.

      And, as I mentioned in the links this morning, AUD is now correlated with Brazil covid. Because IO and futures trading.

      See charts (updated to 2 June) 😊

      https://imgchest.com/p/2bp45z5v45l

  3. BigDuke6MEMBER

    I’ve been noting with interest the ire of several folks on the site regarding their feelings of missing out on the rise of this bear market rally…. lost out on 30% by taking the advice of this site or being in the MB fund.
    They seem angry with DLS…. theywannakickass….
    Apart from the fact that opinions are like a$$holes – everybody got one…so beware the experts of the comment section…
    This all seems like a contrarian indicator to me.
    When folks are complaining big and want to jump in so as not to miss it… then that’s my cue to get out.
    Just sayin.

    • Goldstandard1MEMBER

      Agree, sold my last stocks this afternoon.
      Wait and see now. The big money has already been claimed.

    • happy valleyMEMBER

      Nah – the Fed’s got everyone’s back, so stock prices worldwide to the moon.

    • I report on what I trade, how and why. I don’t tell people what to do – I have told Harry once to buy ALK @62c though.
      I don’t claim to be an expert but I do express how I see things and few others here do same. We exchange opinions and not always agree on how we think things may play out.
      I am not sure what you mean by “so beware the experts of the comment section”.

      Also, even the best traders in the world make mistakes so again not sure what you are trying to say.
      Mate, just don’t read our foolish thoughts.. easy.

        • Understand. It’s just “so beware the experts of the comment section” does not seat well with me.. Yes, none of us is an expert and all have been right some times and very wrong at other times. You, in my view, came across as very arrogant with that comment but I can see I am wrong and I am sorry about my reaction. From your response I can see I got it wrong.

      • That Nucleus Wealth podcast from about 8 weeks back with Mr Padley? was worth paying attention to – he was all-in back then, diving back in when I really wish I had the resolve to!

        • Yep. I remember reading Padley going all in back in late March. Right at the (in hindsight) bottom. I believe he’s since taken profits and is largely back out again.

          • hmmm like all back out again? got a link for that? interesting…

            If I put my Buffet hat on, it does seem that generally the masses are getting greedy right about now!

          • Looks like he took profits and went to 35-40% cash in mid April (after going all in around 24 March).

            links.. (I think you can just join up for free if you can’t read the articles):
            https://www.livewiremarkets.com/wires/taking-the-top-off

            Latest update I found is 19 May, where he seems to have been gradually getting back in more selectively (what seems is on the decimated stocks). Could be back all-in. His March all-in move took some courage and was a master stroke. Kudos to him.

            https://www.livewiremarkets.com/wires/hair-on-fire

          • DominicMEMBER

            Most of the smart money was getting back in then – it’s all technical signals. No biggie. No genius.

    • SchiwagoMEMBER

      30% ? perhaps, if the timing was perfect and disregarding AUD appreciation

    • DingwallMEMBER

      the rise of this bear market rally

      That comment should raise the ire of a few on here ….. they are tearing a new one for anyone who suggest it’s a bear market rally

      • Pretty sure its been a Bull market since March… but hey, I’m just an engineer

      • BigDuke6MEMBER

        Yup I like starting fights
        And niko , you talk about gold which I love so don’t stop.
        When I have the energy I may give you my take on stacking physical gold. The disconnect will come. You can be sure

    • I’m in the MB and up about 4% for the FY. Despite the recent bull market the ASX is still down 6% for the FY so I’m happy enough.

      I still think reality has to intrude eventually, and when it does it will happen quickly. I’m happy to be well away from the markets because they are not just risky they are manipulated. I don’t want to play in a rigged game. It’s for mugs.

      • DominicMEMBER

        If you’re all in you’re exposed. If you’re not, you sleep well at night. Return of capital, not return on capital … and all that

    • Ronin8317MEMBER

      My superannuation is currently 100% cash since last year, and I have no regrets. I was hoping to get back in at the bottom, but the stock market right now defies my rational thought process, so it is better if I sit this out.

      It is not a bear rally but the demise of capitalism. Once the US Fed is buying junk bond, it is a command economy.

      • I had my super 100% cash but 3 days ago capitulated and went all in high growth …. slightest hint of correction I’m back into cash, but this thing could ride for a few more weeks yet, surely! BOOM!

    • DominicMEMBER

      As I have said to a few people on Seeking Alpha over the years: the only thing you’re missing out on is ‘riding the rally’. The money is not in the bank until you take you profits. How many of youse cunce have taken profits? Er, none!

      Most retail guys are pretty predictable – they ride the rally up and ride the crash down … and then sell at the bottom (or pray it all goes up again – which, in this case, it has, but that’s not exactly smart trading because all you’re doing is crossing fingers).

      But now that it’s recovered, who’s selling? Er …. place your bets fellas.

  4. From theage BTL:
    saladdaze
    29 MINUTES AGO
    Both my neighbour and I enjoy a coffee mid-morning. We used to make our own coffee but then we realised we could do more for our country. Now we make each other’s coffee and charge each other $3, thus contributing $6 to GDP. We are thinking of putting the price up to $3.50 and contributing $7. There are lots of little things we can all do.

    • by doing that not only GDP goes up but also they can reduce how much taxes they pay by deducting costs of buying and transporting coffee, buying machine, space used to make it …

      that’s how you help your country … you bankrupt it

    • ErmingtonPlumbingMEMBER

      I always pay $5 for my daily small mocha that’d only costs $3.50 if I took me change.
      Im trying to do my bit to help our nation inflate our debt load way.

    • Jumping jack flash

      Excellent, participation in the New Economy.

      With that $3.50 they can probably repay an IO loan for a million dollars – once the cash rate goes to -10%.

    • MountainGuinMEMBER

      If they dropped their prices by 30 percent they could qualify for jobkeeper as well 😅

    • They will jokingly increase the price to thousands of dollars. ATO will find out and demand backdated GST, Income taxes, and penalties.

  5. So if the CHY is dropping and the AUD rising against the USD, when does our Iron Ore become uneconomic for them?

    • I think that ore, like so many other things, is traded and paid for globally with USD (eg oil, gas etc). Prices are always quoted in USD.
      So, half your equation holds, but I don’t think a higher AUD makes ore less affordable for China. Rather, it means Twiggy et al actually get less AUD for each sale, after conversion back from USD

      I didn’t research this before posting, it’s just what I have come to understand. I will be corrected humbly if I am wrong

      • You’re correct. As long as China can get USDs it can buy ore for the market price, doesn’t matter what the AUD does.

        • I thought because we sold so much we would be market makers and they can’t readily replace our supply.

      • DominicMEMBER

        Correct Arthur. However, what people get their knickers in a twist over is that the lower AUD receipts (all conversion related) make GDP a bit lower. The flip side is, even though Twiggy’s revenue numbers in AUD decline, investors’ AUD earnings are buying them more goods internationally.

        The truth is, the ‘AUD is over-valued’ argument is a sham. If you lower the AUD deliberately to put a gloss on exporters’ numbers you are simultaneously reducing the purchasing power of domestic consumers i.e. robbing Peter to pay Paul.

    • The Renminbi (or CNY) is down around 3.5% from it’s January high vs USD.

      It basically translates to imports of iron ore more expensive for China. In addition to the runaway iron ore price being pushed up by trading on the futures markets.

      But what’s more important, in my opinion, is that China has done away with “GDP targets” which means regional officials aren’t going to necessarily be going head over heels engaging in approving, developing and “building useless sh/te for the sake of GDP” and “economic growth” which demands strayan dirt to make crackly steel by the sh/teload.

  6. haroldusMEMBER

    Was in a Teams meeting today, said I didn’t want to return to the workplace as I had just invested in a new pair of pyjamas.

  7. yeborskyMEMBER

    Hang onto your BBOZ, boys and girls. Perhaps buy a handful more. And be patient.

    • I nearly sold my worst position of bboz today (put the order in and all) listened to a podcast and thought fck it, stick to your conviction and have PATIENCE

      I cancelled the order

      Not game enough to add to it atm

    • I sold my BBOZ a little while ago, bought GEAR (amongst other things) instead, and glad I did.

      But, to be honest, I’m nervous being long – I will sell out into mostly cash if the market gets much higher…it really does all feel fake…

    • holy cow you guys bought a levered up bear ETF, that charges management fees of 1.2% a year plus expenses, when the whole systemic apparatus is deliberately aimed to stop stocks from going down? err I hope it’s not a long-term hold position.

  8. So moved all my USD back home, now fully cashed up and solemnly sworn not to speculate because it’s for a house.

    What do ya reckon, YANK or BBOZ? 😉

  9. What are people’s thoughts on death ? I ask because IVC seems cheap, and unlikely to fall much if markets leg down again…

  10. NEW ZEALAND CORONAVIRUS POLITICAL MISMANAGEMENT: SOME OF THE EMERGING COMMERCIAL CARNAGE …
    Did the Ardern Labour – led government consider the commercial carnage from the panicked political decisions and gullible response to the Prof Neil Ferguson of Imperial College seriously flawed modelling ? …

    Almost half of retail tenants have not paid their May rent – new report … Marta Steeman … The Press / Stuff NZ

    https://www.stuff.co.nz/business/121704549/almost-half-of-retail-tenants-have-not-paid-their-may-rent–new-report

    Almost half of retail tenants have not paid their rent for May, hit by the Covid-19 restrictions on trading in alert levels 3 and 2, a new report shows. … read more via hyperlink above …

  11. I bought Woodside Petroleum, Rox Resources (potential to be gold producer in 1 y, at Youanmi WA) and Nasdaq (-1.5% on back of AUD leap today, using AUD funds bought at 0.57c). Long term purchases 10 y, 5y 10 y (hoping to add consistently to NDQ thinking each month for 10 more months but all at once if the Nasdaq crashes again (unlikely imo). Any thoughts…am I stupid?

    • I dipped into a little Woodside today, too. Not expecting large gains before I exit, though…my finger hovers over the Sell button frequently these days…

      • I thought this was a finance site…at least that’s what The Senate said. Thanks The Burb for you response. WPL seems a good long term buy?

        • Not sure if WPL is a good long term buy, to be honest – it is a speculative play for me on oil and gas.

          I’m still figuring out what I think of time-frames – I’m still learning towards this being a massive bear market rally, but only just…

  12. Reported a few days back. No wonder our Universities have redlined on the business sob stories, they’re salivating at the possibilities.

    ‘In the latest sign of tensions between the United States and Beijing over trade, the coronavirus pandemic, human rights and the status of Hong Kong, the Trump administration may soon expel thousands of Chinese graduate students enrolled at universities in the US and impose other sanctions against Chinese officials.’

    Source: Ljzeera (bot blocked?)

  13. Arthur Schopenhauer

    From The Age:
    “ Staff in non-academic positions have been heavily targeted in the cuts. For example, 45 of 310 positions at Deakin’s “global engagement” portfolio, which promotes the university to the world, will be slashed. Forty-five “E-solutions” jobs and 34 jobs in infrastructure and property will go.”

    ‘Global Engagement’, otherwise know as [email protected] the institution.

  14. Sigh. Joshy tells NSW and Vic to GFY when it comes to helping stump up for the transition from Stamp Duty to LVT.

  15. Just laid all my grass seed, went a bit over the top with seed coverage to make up for the fact I missed the Autumn sowing by a few weeks. The classic Australian overcompensation and she’ll be right. Time will tell, fairly confident though, still sprouting chilli seeds and all my seedlings are growing despite the cold snaps here in SE Qld

  16. Arthur Schopenhauer

    We are rapidly heading to an economy where only one person in a household works.
    In the 1950s that meant one job per household. Today it will be unevenly distributed. Some with 2 jobs, others with none.
    Not good.

    • Jumping jack flash

      I seriously doubt that it is by choice, or social norm, like it was back then. There’s still far too much debt.

      2.4 trillion is a pretty big number these days.
      A few 10s of billions though, meh.

  17. migtronixMEMBER

    3d1k head will be spinning

    “The figures would have been worse but for Australia’s growing population. GDP per capita fell by 0.7 per cent, the largest quarterly drop since the start of the global financial crisis in late 2008.

    The household saving ratio increased to 5.5 per cent, reflecting a lift in gross disposable income and a fall in consumption.

    The increase in income was due to a 6.2 per cent jump in social assistance benefits such as JobSeeker and help to fire-affected communities including $1.4 billion worth of insurance payouts.”

    https://www.theage.com.au/politics/federal/jobkeeper-revamp-in-the-works-as-virus-puts-australia-in-recession-20200603-p54z5z.html

    • “3d1k head will be spinning”

      3D had a fair crack at campaigning for the mass death of elderly to avoid a recession. Even appeared to have been banned again. Will there be a 3rD C0ming?

    • Jumping jack flash

      “…lift in gross disposable income and a fall in consumption.”
      Saving super withdrawls and JobKeeper, obviously.
      Consumption has been buggered for quite a few years now.

      The government has no idea. Any policy that may have worked in the past like Kev’s bonus and pink batts is not going to be as effective now.

      Theres far too much debt, and people still need it desperately, so whatever windfall they get is going to be used primarily to service or obtain debt. The “quest for debt” hasn’t changed.

    • Nothing burger is right. To get 25k one has to spend 150k and earn less than 125k or 200k as a couple. Can’t see any positives here – can only be spun as more handouts for the wealthy.