I shall refrain from giving my personal opinion on all matters politics, but I am curious to see what "stimulus" this may have on the markets today. Leadership uncertainty at a party and federal level has had an effect on many companies especially in mining. Lets sit back and watch what unfolds today on the markets and the "pulpits".
MARKETS
Before we jump into it, the link below is some interesting reading for those of you considering investing in technology companies.
Is Technology the Most Exciting Industry in the World? Click on this link to find out!
Now lets hand over to +Alex Cowie from +Daily Reckoning Australia
Written on 26 June 2013 by Dr. Alex Cowie
Q: How can you spot a vegan at a dinner party?
A: Don’t worry, they’ll tell you…
Markets like this require a dose of humour to get through!
Because stocks, bonds, currencies, commodities…the
current rout is taking no prisoners.
As central bankers make moves to remove the stabilisers from
the market, the mood is turning sour as quickly as asset prices are falling.
The consensus mood is almost universally bearish. The
question is: will consensus be proven wrong?
With many asset prices at multi-year lows, will this be
looked back on as a massive contrarian buying opportunity…or is buying
this market today an investing death wish?
The well-worn contrarian quote from that 18th
century financier Baron Rothschild goes, ‘The time to buy is when there’s blood
in the streets.‘
In his case it was quite literal: he bulked up the
substantial Rothschild family fortune by betting big after the carnage and
confusion of the Battle of Waterloo.
However, the full quote was in fact, ‘Buy when there’s blood
in the streets, even if the blood is your own.‘
Well, there are plenty of investors out there that could
relate to that today.
Is it Time to Get Bullish Again?
It’s tough to imagine. Junior resource companies have been
falling for two and a half years now, and have lost over 70% on average.
Small Resources Index – a World of Pain
Source: Bell Potter
The worry now is that in the last month the small resources
index has crashed through the level set in the GFC. This means it’s now at nine
year lows.
Right now it’s hard to think we have seen the worst of it.
Until recently, I’ve been pretty bullish. The thing is even just talk of the Federal Reserve dialling back
on the current $85 billion buying program caused the market to crash – even
while the Fed is merrily still buying $85 billion each month.
If global markets are falling simply in anticipation of
tapering, what will happen when tapering actually happens?
In yesterday’s Money Morning I explained how the
Bank of International Settlements (BIS) is pressuring all central banks to step
off the gas and tighten up monetary policy.
They may be getting their way. It’s not just the Federal
Reserve talking about it, but China seems to be actually tightening
already. This could have a major effect on commodities and resources in
particular. Marc Faber reckons commodities look ‘horrible‘.
A mining exec I was in touch with recently said, ‘It will be
interesting to see how the next 12 months plays out. I think there will be a
lot of blood on the floor.‘
This strain is showing up in more than just stock prices.
Brokers are leaving the industry each month in large numbers. The Australian
financial services sector has now shrunk by around 10% from its recent peak.
Everyone is having a tough time. As a measure of retail
investor activity, the web-traffic for the stock forums has more than halved in
the last six months.
You can understand why. Even last year’s hot trotters are
turning into this year’s dog food. Sirius (SIR), the rags-to-riches nickel
explorer with the dream project, has fallen 70% in a few months from $5.00 to
as low as $1.56 yesterday. Another recent market darling, Linc Energy (LNC),
has crashed from $3.00 to $0.78 as of yesterday. There are many more with
similar charts.
Sirius and Linc – Sharp Falls in Last Three Months
Source: Bigcharts
In recent days I’ve taken profit on some of the winners in
the Diggers and Drillers tips, and cut some losers in anticipation of
prices falling further. In all, I’ve halved the number of stocks in the
portfolio.
But just as this all unfolds, some people in the market are
getting very bullish, with talk of this being an outstanding opportunity. We’ve heard that the
whole way down of course, but ultimately they may be right. Patience will be
the key, as things may well get worse before they get better.
Just as some high profile resource funds are being forced to
sell to meet investors’ redemptions, there are other funds out there that are
starting to see value and buy ‘quality’ on the cheap. They admit that they will
have to be patient.
Others, like mining legend Owen Hegarty, made the case for
the current squeeze in mining to make the next bull market ‘stronger for longer‘.
History to Repeat?
Your regular editor, Kris Sayce, is certainly getting more
excited by the day. The market reminds
him of the collapse in 2008. Back then, when everyone was running for the
hills, he tipped a raft of beaten up stocks which went on to put in big
triple-digit returns, including gains of 242%, 338% and 458%.
The trigger that Kris saw back in 2008 (along with the
torrent of central bank money printing) is happening today – the collapse of
the yen.
The yen
slumped from late 2012 through to the early part of this year, before
rallying in recent weeks. But that rally looks to be over. If Kris is right, he
believes that could be the catalyst for another Aussie stock rally.
It’s a risky strategy, but I don’t think I’ve ever seen him
so confident.
Dr Alex Cowie
Editor, Diggers & Drillers
Editor, Diggers & Drillers
REAL ESTATE
Chinese Buyers Sway
Australia Property Market
Conventional wisdom says a nation's house prices swing with
its economy. In Australia, economists are paying increasing attention to
another factor: Chinese immigration.
Wealthy Chinese are now among the biggest buyers of real
estate in Australia, picking up properties ranging from modest suburban homes
to waterfront mansions with views across Sydney Harbour.
In one of the biggest purchases this year, a Chinese buyer
spent more than ...continue reading
Rick Otton Warns
Australian Property Investors To Get Savvy as Data Shows Nation’s Real Estate
Wealth Now Outranks Shares and Super
Real estate millionaire, Rick Otton, has revealed that it’s
more critical now than ever for Australian property investors to get savvy with
creative strategies to build long term wealth. Mr Otton was responding to new
data which shows that the nation’s real estate wealth now outstrips shares and
superannuation, and that investors make up ...continue reading
Report dismisses
boom-and-bust property theory
PROPERTY prices are tipped to stagnate over the next 18
months as local and foreign investors pull back from the market, a new private
sector report warns.
But the "boom-and-bust'' cycle some analysts are
warning about is discredited as being overblown.
Instead, prices are tipped to continue to ...continue reading
SME
The carbon tax one
year on: Businesses absorb costs as politicians squabble over impact
On the eve of its first birthday, politicians are once again
butting heads over whether or not the carbon
tax impacts small business.
While politicians are arguing, research published yesterday
by the Australian Industry Group reveals the majority of businesses did not
pass on costs to consumers.
The survey conducted by Ai Group of 400 Australian
businesses shows 70% of businesses had not been able to pass on any energy cost
increases ...continue reading
Australian SMEs
leading the world in flexible and mobile work
Australian small business owners and employees are leading
the way in flexible working arrangements, according to new research by
international technology company Citrix.
The international survey of 1262 SME decision makers
included 253 Australian business owners.
Half of the Australian business owners surveyed reported
they had ...continue reading
SMEs positive about
next 12 months
Small to medium-sized enterprise (SME) owners are positive
about growing their business in the next 12 months, according to RSM Bird
Cameron’s thinkBIG 2013 study.
The study benchmarked business confidence and the attitudes
of owners towards planning, growth and profitability, exit planning and
superannuation. Some 308 business owners participated in the 2013 study,
providing insights into how ...continue reading
That's it for this week folks... We look forward to bringing you what's important again in next week's edition. Until the next time...
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