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Month: April 2016

Market Matters Afternoon Report Thursday 21st April 2016

by james Carter

Market Matters Morning Report Thursday 21st April 2016

by james Carter

How much do we think Central Banks are controlling Equities? A number of subscribers have asked over recent times why we mention the Central Banks so often when considering our view on the future direction for stocks. Hopefully today we can explain this in a very simple manner. Hence this should also help explain a large part of our medium term view for stocks. There is no doubt that since the GFC back in 2007/8 Central Banks and their respective policies have arguably played the most determining role ever in supporting equities. Central Banks have cut interest rates below zero, pumped money into world economies in unprecedented levels in a desperate effort to stop the world falling into a deep recession / depression. Considering the damage of the GFC, and more importantly the reasons of greed / excess which caused it in the first place, we believe they have performed a great job….so far.
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Market Matters Afternoon Report Wednesday 20th April 2016

by james Carter

Market Matters Morning Report Wednesday 20th April 2016

by james Carter

Have resources run too far too fast? At the start of 2016 one of our major calls was for a depreciating $US that would revive commodity prices and lead to outperformance from the ASX200 for the first time in a decade. The view of the $US and commodities was spot on but unfortunately due to our large weighting to the banking sector the local market remains the laggard on the world stage. Interestingly last night we had another strong night for resource stocks but the “Fang’s”, the darlings of recent times, were negative i.e. Facebook, Amazon, Netflix and Google. Who would have thought at Christmas that by late April BHP would be up 10% but Amazon would be down 7%, especially as the S&P continues to rally towards all- time highs. This is another great example for investors of the cyclical nature of stocks and that running with the crowd can be a dangerous game, even if it feels comfortable and easy at the time! As we have discussed previously the renewed market interest in the underperforming stocks is a tell-tale sign of the maturity of this bull market but not necessarily its end. We have been advocating trading the resources space from the buy side recently but how much fat is now left in the trade as the papers get excited on the sector and analysts start to become bullish upgrading forecasts; where were they in January? BHP Billiton (BHP) BHP looks set to open around $20.10 today, up 2.2%, after further gains from iron ore and crude oil.
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Market Matters Afternoon Report Tuesday 19th April 2016

by james Carter

Market Matters Morning Report Tuesday 19th April 2016

by james Carter

As US stocks surge what to buy and sell locally short term Last night US equities again showed their current strength by ignoring the negative news from Doha and rallying, the S&P500 ended the day only 2% below all-time highs. Remember the simple under lying principle – a market that rallies on bad news is a strong market. At Market Matters we remain bullish US equities in the short term targeting fresh all time highs, the hardest call remains how far they will advance. Our best forecasts at present are – S&P500 to the 2300 area and for the ASX200 ~5400. As readers know we then believe equities will be in for a very tough but exciting time for the active investor. History tells us that it’s the poor performers during a bull market which outperform during its maturity, hence what stocks to be in for the finale of this unloved bull market? S&P500 Amcor (AMC) We have been targeting over $15 to take all / part profit on AMC for around 6 months, for investors who are long, , we are sticking with this view. Take all or at least half profit on AMC into current strength over $15. And / or run a stop on positions at $14.80. REA Group (REA) REA has been a fantastic performer over the last few years but it remains in our target area for its current advance and we believe investors who are long should consider taking all / some profits: 1.
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Market Matters Afternoon Report 18th April 2016

by james Carter

Market Matters Morning Report Monday 18th April 2016

by james Carter

Oil production-freeze talks in Doha collapse After extending talks for 10 hours in Doha (capital of Qatar) OPEC members and Russia, which represent over 50% of the world oil production, have just failed to implement any freeze on supply Simply Saudi Arabia, the world’s largest oil producer, refuse to limit production unless Iran joins the agreement BUT Iran who have just started shipping oil after nuclear sanctions were lifted regard any production limitations on itself as “ridiculous”. The market felt optimistic prior to Doha hence we anticipate at least a short term snap back in the oil price which has rallied over 50% since the panic lows in January. Crude Oil The resource based currencies are already weak with the $A spiking under 76c on the news; this looks likely to be the catalyst for the short term correction in equities we discussed in the weekend report. US equities in particular have recently been highly correlated to the oil price which has just opened 6.7% lower on the Doha news. The question is; do we use this likely spike down in oil stocks as a buying opportunity? We are simply going to look at the leading three stocks in the space for answers: BHP Billiton (BHP) Recently we changed our view on BHP targeting continued strength towards the $21 area, BHP was already looking to open down ~50c, this may easily extend to $1 on the Doha news. On a risk reward basis we can buy BHP in the $18.25 area, targeting $21 with stops under $16.70. Woodside Petroleum (WPL) WPL continues to underperform relative to the sector, a characteristic we do not like e.
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Market Matters Afternoon Report 15th April 2016

by james Carter

Market Matters Morning Report Friday 15th April 2016

by james Carter

Have the market darlings had their day? One of the major takeout’s of the last week has been the fickle nature of the stock market towards different sectors as it swings from love to hate and back again, often with no apparent reason; this week everyone loves resources after years in the wilderness. The chart below shows how local retail stocks almost became a joke in the market back in 2012 but then they staged a solid unheralded ~65% rally while the ASX200 has struggled to gain just 10%. We can assure you that not many brokers / clients / fund managers liked retail stocks back in 2012. As we often say look beyond today for at least 6-12 months and IGNORE the newspapers. Australian Retail Index Two amazing success stories of the last 18 months have been Bellamy’s (BAL) + Blackmores (BKL). Both have enjoyed the explosion of baby formula & Vitamin sales into China. The ducks have been perfectly aligned for these two solid companies, including the Chinese decision to abolish their one child policy. The one child policy has had (as it was intended to) a big impact on population growth in China as the below chart outlines Chinese Population Growth It also means that the Chinese population has been ageing, fairly dramatically since the 1980s as this chart highlights Chinese working age population – showing aging demographic The abolition of the one child policy will clearly have a large impact on demographic trends in China’s, and ultimately, more babies will be born in the coming years. There have been many stories in the press of Australian living Chinese buying all the baby formula stock from local supermarkets and then on selling through eBay or sending directly to China – certainly reinforcing the demand aspect for their products. However it also echoes of panic buying that often accompanies tops in stocks.
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