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holycow

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Wednesday, December 01, 2004 - 09:14 am:

6093,11552816,00.html, Dollar losing numbers game

A SHOCKING set of numbers on the Australian economy had the dollar on the ropes yesterday, but most analysts predicted it was only a temporary setback as the plunging US dollar remained the driving force behind a strong local currency.

The dollar plunged more than US1c to US77.62c at the close of local trade yesterday, and was also substantially weaker against the euro, the yen, the pound and the New Zealand dollar.

The catalyst was a string of disappointing data showing building approvals and retail sales had shrunk in October, when a rise had been expected.

Building approvals in October fell 2.4per cent, leaving the rate 21per cent below a year ago and almost 30per cent down from the peak in late 2002.

The value of retail trade fell by 0.7per cent in October, again not delivering the boost economists had expected from the federal Government's increased family payments.

It comes in the wake of data on Monday showing a blowout to more than $13billion in the monthly current account deficit.

*** according to a friend of mine who is in the retail biz - the October sales did not pick up until around 20 November (last weekend), so (may be) the retail story is not over just yet because it seems the sudden on rush of goods was so great that most of the stocks were gone...

HC

"... if you've got a chart, I have an opinion!"

holycow

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Monday, December 06, 2004 - 09:37 am:

Lies, Statistics and Funds

Intech's Korbel says the logic holds even though local funds book dividend tax credits on local shares, and none on overseas shares. Australian shares are returning about 9 per cent pretax over the long term, and about 8.9 per cent after tax. The long-term after tax return on international shares is lower, at 8 per cent, but the gap is outweighed by the extra volatility that a "Buy Australia" strategy generates. A portfolio of Australian shares has produced a negative annual return once every four years, on average. A portfolio that is expanded to include overseas shares goes negative only once every eight years.

HC

"... if you've got a chart, I have an opinion!"

holycow

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Monday, December 06, 2004 - 10:01 am:

This is one news report that will surely stoke the "fire of greed and speculation" in the stock market... Good news! :-)

Taking stock of big year
By Anthony Black
December 5, 2004

INDUSTRIAL company Wesfarmers was $25.96 when stockbroker Sean Conlan recommended it as a buy in The Sunday Telegraph on December 21, 2003.

On Friday, Wesfarmers finished at $38.30. It was just one of numerous stocks - many of them highlighted in our share tips column - that ended 2004 well ahead.

"We have upgraded our currency and commodity forecasts, resulting in a positive move for Wesfarmers," Macquarie Equities' Conlan wrote in 2003.

On April 18, Richard Morrow, a director of EL and C Baillieu, suggested that investors put a hold on Wesfarmers.

"Wesfarmers has to be the best-managed industrial group in Australia. With strengths in every area of the business, it offers growth, dividends and a spread of investments across many industrial segments," Morrow wrote.

Each week in The Sunday Telegraph, Australia's best brokers and analysts recommend stocks to buy, hold and sell.

They make their calls based on the latest profit results, prospects, executive appointments, company guidance, market expectations, corporate activity, economic data and analysis, and news here and overseas.

And this year, many of their calls have proved on the money.

Sean Conlan recommended apparel retailer Colorado on April 4, when it was priced at $4.68.

Colorado stock closed at $6.40 last Friday.

Andrew Doherty, of Aspect Huntley, recommended a year ago that investors buy JB Hi-Fi, then trading at $2.23.

He told readers the company would benefit from its steady store roll-out across Australia". JB finished at $3.77 on Friday.

Peter Russell, of Intersuisse, put a "buy" on technology company Redflex Holdings on February 15, when it was $1.48.

He described Redflex as a world leader in providing red light traffic camera photo enforcement systems. It finished at $3.70 on Friday.

Sue Dalrymple, of Lands Kirwan Tong, suggested on February 22 that investors buy diversified financial services company Record Investments at $3.75.

She expected good earnings growth to flow as a result of good management and a strong market outlook. Record Investments finished at $5.83 on Friday.

Dalrymple put a "buy" on equipment-hire company Coates Hire on March 14 when the stock was $3.16. Coates Hire finished at $4.21 on Friday.

Michael Heffernan, of FW Holst, has long been bullish about Coles Myer, and recommended it on March 21, when the stock was priced at $8.11.

"Substantial cost savings and a continuing robust economy should sustain a strong share price for several years," he said.

Coles Myer finished at a healthy $9.94 on Friday.

The Australian share market has put on almost 20 per cent this year on the back of companies reporting strong profits and bright prospects, a growing economy with low inflation and a low unemployment rate.

On February 29, Carl Daffy, of Wilson HTM, recommended Woodside Petroleum at $15.22.

Woodside was $19.90 at the close of trading on Friday.

On July 18, Daffy recommended National Foods at $4.37. It finished at $5.79 on Friday.

BHP Billiton was a favourite among many brokers, including Mike Kendall, of Goldman Sachs JB Were, who recommended it on February 22 as a buy at $12.35. BHP Billiton finished at $15.28 last Friday.

Although a share price that exceeds a broker's valuation can prompt a "sell" recommendation, the price can keep rising.

But as Michael Heffernan is fond of saying: "No one ever goes broke taking a profit."

The Sunday Telegraph

This report appears on NEWS.com.au.

HC

"... if you've got a chart, I have an opinion!"

peterloh

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Monday, December 06, 2004 - 10:01 am:

HC,

That support my research that the Australian Equities go up every 4 years and has one year negative in general. The fact that we had 3 negative years before that, the law of average caused me to be optimistic.You see where I am coming from, we are playing catch up.

In the past one year we did outperform the international shares on an index basis.This will change in the later part of next year.If there is any delay, we look towards 2006 for international equities to be ahead.

For diversification the bench mark is 50/50 for aggressive investors.I had taken a different view in the past 3 years thus reflecting a different result. I subscribe to the notion of if I have to change the balance I normally axed my worst performers and keep the best performers.I also decrease my weighting in international equities.When international equities failed to perform and our dollars increase in strength our losses were greater on international equities than domestic equities.Thus even when international equities performed better we have to keep an eye on Australian currencies.We have to hedge the currencies or used funds that are hedged when investing in international equities.

PL

(Message edited by robin on December 06, 2004)

-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

peterloh

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Monday, December 06, 2004 - 10:07 am:

Last line should read international "equities "and not currencies.

holycow

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Monday, December 06, 2004 - 10:36 am:

Peter,

The message was highlighted to reflect what you have told me earlier.

Cheers.

PS: I notice there are a fair bit of messages showing me the positive side of the long term index and market, I guess I like to clarify my stance here - I am expecting an intermediate correction, not a total collapse or a crash like 2000/01. My rationale here is the market needs this correction to regroup for a further run. A possible cause for such correction is the recent Chinese curb on their runaway growth - which, at the moment I believe the full impact has not filtered down to the Aussie economy yet (has anyone paid any attention to last month's poor export figure?).

I am also aware of the year end to first quarter's good investment "climate" in most Western markets and hence would not discount the market's ability to rally. What I am advocating is to be vigilant and if possible, take some profit off the table and keep a portion of your capital in cash as a defence mechanism. For those who believe their stop loss could stem the tide of any unsuspected dump in their high flyers, I guess they should ignore what I am saying.

Meantime, I am continuing my usual approach but will be more willing to take profit and keep a portion of my capital in cash - this may reduce my possible/potential gain but I believe this also gives me a more balanced risk/reward ratio and comfort level.

Now I feel better and don't feel like a cornered cow... :-)

HC

"... if you've got a chart, I have an opinion!"

peterloh

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Monday, December 06, 2004 - 11:13 am:

HC,

Always good to be cautious and folly to be overconfident.

Cheers,

PL

holycow

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Monday, December 06, 2004 - 07:03 pm:

Australian Shares Reach Record Highs - Dec 6, 2004

Bell Potter senior investment adviser Stuart Smith said the market today was "terribly mixed on low volume" without any sector dominating.

But there were some individual standout stocks with Foodland Associated shares soaring $4.14 or more than 21 per cent to $23.35 after wholesaler and retailer Metcash Trading's announced an $846 million takeover bid.

Metcash remained in a trading halt at $2.94 at the close of trade.

Mr Smith said the market was still on the march to 4000 points.

"There is enormous momentum built up by the daytraders," Mr Smith said.

"The daytraders are not just buying second rankers, they're buying the heavyweights as well.

"The daytraders are keeping the market heading towards 4000."

On the Sydney Futures Exchange, the December SPI 200 futures contract at 1611 AEDT was two points down at 3959 - an 8.5 point premium to the underlying index - on a volume of 15,146 contracts.

***Blimey! It seems the daytraders are in charge according to Mr.Smith.... and he is not kidding! :-)

HC

"... if you've got a chart, I have an opinion!"

holycow

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Wednesday, December 15, 2004 - 05:44 pm:

Wesfarmers has few options: analysts
Wednesday December 15, 2004, 4:03 pm

Wesfarmers Ltd's plan to return $378 million to shareholders - its second payout in a year - highlights the difficulty the industrial conglomerate has reinvesting its cash flow, analysts said.

While not a bad problem to have, UBS analysts said it does highlight how difficult it would be for the group to replace an earnings spike expected in 2005/06.

The proposal could reflect a lack of significant new growth opportunities such as acquisitions, Credit Suisse First Boston (CSFB) said...

*** found this news particularly telling with the current crop of high achievers in ASX.

HC

"... if you've got a chart, I have an opinion!"

peterloh

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Wednesday, December 15, 2004 - 05:53 pm:

HC,

A lot is going back to the share market to support its own share price. Lacking in opportunities and also valuation is getting too expensive. You will find that companies with buy back will have their share price increase as they have now less to go around, whilst the number of fund managers increase but less number of shares to go around especially if they have to mimic the share index.

PL

holycow

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Friday, January 14, 2005 - 12:10 pm:

2005 – Here We Come!
January 12 2005
Australasian Investment Review – (AIR)

...

Growth in the US economy is one prediction that seems to be largely agreed upon. JP Morgan is recommending global investors to be "overweight on the US", as it has clearly re-established its growth differential with other regions of the world, a situation the Wall Street broker expects to be maintained through 2005.

The broker notes that a lot of attention was given to risks surrounding US growth in 2004, but suggests there is a greater risk in 2005 of "ex-US growth" undermining global momentum.

Independent research house, BCA Research, concurs with the "ex-US" factor. Its strategists consider the world’s economic outlook to be a balancing act from one region to the next, but suggests that global growth is positioned for a low inflation expansion, possibly even a boom.

"America seems to be running an inflationary economic policy" says BCA, citing a massive current account deficit, household savings collapse, and historically low interest rates.

The researchers consider Europe to be in the opposite position, with business activity close to stagnant. China’s boom, BCA notes, has ended without a bust with growth stabilized at 8%, and inflation now peaked. Japan has been impacted by the Chinese slowdown, and indicators are negative.

JP Morgan and BCA differ, however, when it comes to US interest rates. Morgans expects the Fed to raise rates by 25 basis points at each meeting through to the end of 2005, in line with expectations of robust economic growth, where they will reach 4.25%.

BCA sees US short term rates peaking in 2005, then going on hold: "We doubt that the Federal Funds rate will make it past 3%".

US interest rate predictions flow through to an important factor for the Australian economy, being the US dollar.
...

This will result in the Aussie peaking at US82 cents by June, before easing back to end the year nearer US76 cents. BCA predicts that market forces shaping are providing a "significant intermediate-term bottom" in the US dollar, before a trading range develops. This implies a range of US80 to US70 cents for the Aussie.

Among CommSec’s other concerns is Chinese growth, and again this is a factor close to the hearts of Australian investors.

While both Morgans and BCA see the Chinese economy as having landed "softly", with a stable 8% growth continuing and inflation under control, CommSec worries that China could grow too quickly in 2005 causing inflation to spike higher, and subsequently lead to a "hard" landing. (So has it landed yet or hasn’t it?)
...

Beginning with the US outlook provided by BCA, and the US outlook is as much a key factor in the local market as anything else, we have a prediction that the "completion of the current advance will polish off the cyclical bull market that started in 2002". BCA expects a peak in share prices in the first half of 2005, with a downtrend developing in the second.

In stark contrast, CommSec rants that "The gloom and doom merchants have been peddling fears of a new bull market for shares for the past two years. The fears haven’t materialised for the past two years and they won’t materialise in 2005".

A new bear market for shares is not on the horizon, suggests CommSec, either in Australia or abroad.

In Australia, the economists say, the economy is growing, profits are rising and share market valuations are still favourable, pointing to further upside for share prices.

Enter JP Morgan. Without, I’m sure, wishing to be the harbinger of bad tidings, JP Morgan considers that "now could be a good time for the bears to end their hibernation". Australia’s economy is tracking almost exactly, the broker points out, from every peak to trough, the path followed ahead of the famous "recession we had to have" in the early 1990s.

Back then, high household and corporate indebtedness, inflated house prices, a yawning current account deficit, and rising inflation pushed the RBA into aggressive monetary tightening, JP Morgan reflects.

This pushed the economy into a deep and painful recession. It also led to share market doldrums that needed a good old-fashioned war, being Gulf War I, to snap the market out of it.

Obviously JP Morgan draws parallels with Australia’s current economic situation, but its not all doom and gloom.

The broker doesn’t believe there will thus be another recession, firstly, because economic managers are unlikely to repeat past mistakes (that’s a brave prediction) and secondly, that imbalances such as the oversupply of housing and the "yawning" current account deficit should be to a large extent self-correcting.

Weighing in to the argument is a fairly circumspect Macquarie Equities, who notes that aggregate EPS forecasts remain buoyant at 13.4% for the year to December, and that the momentum of earnings upgrades has continued to accelerate over the last few months, suggesting the risk of earnings disappointment in the upcoming reporting season is low.

In Macquarie’s view, the macroeconomic factors that have supported the strong earnings growth seen over the last 12 to 18 months are expected to continue.

Perhaps we’ll leave the last word to the most bullish of the bunch – our friends at CommSec – who can’t close the discussion without mentioning a couple of "left-field" factors that might yet upset the applecart.

These include a banking crisis in China, a dollar crisis in the US, China/Taiwan tensions, North Korea, a further severe drought in Australia, and, well, just inflation in general. And their report was written before Boxing Day.

Have a happy New Year.

~~~~~~~~~
I have snipped off many "useful texts" from the full report. So please check it out.

When all the brokers seem to be in sync, I am wondering what's left for stock traders and stock picking - all you have to do is to follow their picks and you will be laughing all the way to the bank!

If your memory is good, just go back a few years... and ask where were these wiseguys back then. (Nope! I am not picking on them, I'm just asking question, just asking question...)