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1.Market Observations

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9 Dec 2017 (AFR) – ASX: Shares creep higher in lacklustre week of trade

(9 December 2017, AFR, p33, by Sarah Turner and Patrick Commins ‘Shares ended in positive territory on Friday with utility companies putting a bit of a spark into the benchmark at the end of a lacklustre week. The S&P/ASX 200 index advanced 16 points, or 0.3 per cent, to 5994 while the broader All Ordinaries climbed the … Continue reading

9 Dec 2017 (AFR) – Recovery looks here to stay – Global economic indicators align for first time since GFC

(9 December 2017, AFR, p17, by Jacob Greber) ‘It’s been a long time coming – the best part of a decade. But for the first time in years there’s a palpable sense the current global buoyancy may just be the real deal. Markets certainly seem to believe that’s the case – equity prices keep hitting … Continue reading

7 Dec 2017 (AFR) – Donald Trump’s pledge over Jerusalem rattles Middle East

(7 December 2017, AFR, p13, by Mark Landler and David Halbfinger) ‘President Donald Trump plans to recognise Jerusalem as the capital of Israel and move the US embassy there, upending nearly seven decades of US foreign policy and potentially destroying his efforts to broker peace between Israel and the Palestinians.’ Read more at AFR.com (might … Continue reading

7 Dec 2017 (AFR) – Rising rental guarantee incentives a worrying sign for apartments

(7 December 2017, AFR, p12, by Su-Lin Tan) ‘Real estate agents and developers are offering rental guarantees, even advertising on personal ad website Gumtree, in a bid to push sales in a slowing housing market.  Last month, Melbourne developer Growland offered a 6 per cent yield guarantee for two years on new apartments purchases at … Continue reading

7 Dec 2017 (AFR) – Household gloom overshadows investment surge

(7 December 2017, AFR, p6, by Jacob Greber) ‘A growing surge in business investment and government infrastructure spending is keeping the nation’s economy afloat as households grind through the slow pain of paying down a record debt pile at a time of weak wages growth and potentially rising interest rates. Burdened by the weakest quarter … Continue reading

7 Dec 2017 (AFR) – Kenneth Rogoff sees global economy entering ‘catch up’ growth phase

(7 December 2017, p1, by John Kehoe) ‘Eminent US economist Kenneth Rogoff says the global economy is entering a “catch-up” growth phase and that countries including Australia should benefit, as technology advancement kicks in and the lingering devastation of the 2008 global financial crisis finally fades. Rogoff, a professor at Harvard University and a keynote … Continue reading

7 Dec 2017 (TheAge,SMH) – Amazon says launch in Australia was its biggest ever

(7 December 2017, The Age, p23, Petrina Berry) ‘Amazon claims its Australian online store’s launch was its biggest ever international opening with tens of thousands of shoppers visiting the site in one day. A statement from the e-commerce giant said first day orders on Amazon.com.au were higher than for any other launch day in the … Continue reading

8 Dec 2017 (TheAge) – Australian dollar knocked lower on weak terms of trade

(8 December 2017, The Age, Business, p25, Vesna Poljak, Sarah Turner) ‘A big miss on the trade surplus caused the Australian dollar to slump to its lowest level since June, underscoring the economy’s vulnerability to lower iron ore prices. The trade surplus for October came in at $105 million, narrowing month-on-month from a revised $1.6 … Continue reading

7 Dec 2017 (AFR) – Auction flop highlights gap between buyers and sellers

(7 December 2017, AFR, p32, by Larry Schlesinger) ‘A commercial property portfolio auction delivered the lowest clearance rate of the year, highlighting the gap between vendor expectations and what investors are willing to pay, even for blue-chip assets. CBRE’s final Premium Portfolio auction of the year was well attended and had multiple bidding on all … Continue reading

7 Dec 2017 (AFR) – Apartment oversupply to push down demand for lots and prices

(7 December 2017, AFR, p31, by Larry Schlesinger) ‘An oversupply of new apartments in Melbourne and Brisbane could be the saving grace for buyers of new house-and-land packages in the outer suburbs. Market forecaster BIS Oxford Economics expects demand for new housing lots to fall and prices to ease in both capital city markets as buyers take advantage … Continue reading

7 Dec 2017 (AFR) – Global house price growth dips: Knight Frank

(7 December 2017, AFR, p31, by Su-Lin Tan) ‘Global house price growth has slowed, Knight Frank’s latest Global House Price Index for the third quarter shows but Australia has risen up the rankings. House prices across 56 countries increased 5.1 per cent in the year to September down from 6.3 per cent in the year … Continue reading

7 Dec 2017 (AFR) – Why the ASX will beat Wall St in 2018: Macquarie

[COMMENT: Here is another forecast – some people would call this guess-work.] (7 December 2017, AFR, p27, by Patrick Commins) ‘The ASX’s “sweet spot” of reasonable underlying economic growth, persistently low rates, and relatively attractive valuation will make Australian shares a better investment in 2018 than their more fancied US counterparts. That’s the view of … Continue reading

7 Dec 2017 (AFR) – Recovery has taken hold across the global economy, so it’s time to cut debt

(7 December 2017, AFR, p26, by Martin Wolf, Financial Times) ‘The world economy is enjoying a synchronised recovery. But it will prove unsustainable if investment does not pick up, especially in high-income economies. Debt mountains also threaten the recovery’s sustainability, as the OECD, the Paris-based group of mostly rich nations, argues in its latest Economic … Continue reading

6 Dec 2017 (AFR) – How to pay for US tax cuts the next worry for Wall Street

(6 December 2017, AFR, p30, by Philip Baker) ‘As the rah-rah sharemarket crowd on Wall Street pushed the Dow Jones to yet another record high, there was plenty of simmering disquiet on bond desks as their more conservative brethren identified one major problem with the latest round of US tax cuts: How to pay for … Continue reading

6 Dec 2017 (AFR) – Why Australia can stay recession-free for longer: BIS Oxford Economics

(6 December 2017, AFR, p28, by Patrick Commins) ‘Australia is likely to lag the current global economic uplift, but strong population growth and a fundamentally resilient economy should see the country outperform other developed economies over the longer term, BIS Oxford Economics head of Australian economics Sarah Hunter says. The relative underperformance of the local … Continue reading

6 Dec 2017 (AFR) – Santa rally gift that (mostly) keeps giving – Will Santa bring a market rally? Here’s why it’s probable.

(6 December 2017, AFR, p27, by Chris Stott) ‘The well-worn investing aphorism “sell in May and go away” is founded in the frequently volatile performance of the sharemarket in May. Investors may also be familiar with the so-called “Santa rally” phenomenon based on the frequent outperformance of the market in the lead-up to and during the … Continue reading

6 Dec 2017 (TheAge) – Reserve Bank of Australia leaves interest rates on hold at record low of 1.5 per cent in December

(6 December 2017, The Age, Business, [29, Eryk Bagshaw) ‘The Reserve Bank of Australia has left the official cash rate on hold at 1.5 per cent at its last meeting before Christmas, ending the year the same way it started – with interest rates at a record low. In explaining why it had left the … Continue reading

6 Dec 2017 (TheAge) – Amazon launch a ‘non-event’ – Happy day for retailers as Amazon fails to live up to the hype

(6 December 2017, The Age, Business, p23, Patrick Hatch) ‘Australian retailers have breathed a sigh of relief and enjoyed a healthy bump to their share prices after their worst fears about Amazon outgunning them on price and service failed to eventuate. The American e-commerce giant sent its Australian website live with “millions” of products for … Continue reading

5 Dec 2017 (AFR) – Markets are never wrong, until there is a crash

(5 December 2017, AFR, p36, by Philip Baker) ‘There’s an old saying that dictates the market is never wrong, that the price of any asset is in line with the basic fundamentals that are there for everyone to see. There is always a reason for a good old fashioned price surge, up or down, even … Continue reading

5 Dec 2017 (AFR) – GDP on track for 3pc growth but no RBA rate hike in sight

(5 December 2017, AFR, p35, by: Vesna Poljak, Jonathan Shapiro) ‘The economy appears on track to post a solid quarter of growth but a rate hike is no closer unless the outlook for consumption lifts. Third quarter company profits and inventories released on Monday are consistent with consensus forecasts for gross domestic product growth of … Continue reading

5 Dec 2017 (AFR) – House prices have more to fall, economists say

(5 December 2017, AFR, p6, by Su-Lin Tan) ‘House prices are set to ease as the growth in mortgage lending, which fuels price rises, finally starts to unwind, two economists have warned. Sydney house prices have fallen 1.3 per cent in the three months to November and will likely keep doing so, particularly as the … Continue reading

5 Dec 2017 (AFR) – Private sector wages rose 1.1pc in September quarter: ABS

(5 December 2017, AFR, p5, by Jacob Greber) ‘There has been a flicker of light in the slow wait for a rebound in wages growth, with official data recording the strongest six-month gain in private sector salaries in five years. Wages rose 1.1 per cent in the September quarter from the previous three months, when … Continue reading

4 Dec 2017 (AFR) – Melbourne land price surge puts affordability under pressure

(4 December 2017, AFR, p32, by Larry Schlesinger) ‘Melbourne’s long-held status as the country’s most affordable new housing market is under severe threat with median lot prices hitting $300,000 in October, pushing the total cost of building a new house to well over $500,000. The figures, compiled by project marketers Red23. show lot prices rose … Continue reading

4 Dec 2017 (AFR) – US Senate provides tax win for President – Donald Trump says he’s ‘unbeatable in 2020’ after tax bill win

(4 December 2017, AFR, p13, by John Kehoe) ‘Donald Trump’s push to cut taxes by $US1.4 trillion over a decade and slash the corporate rate to 20 per cent is within reach after the Senate narrowly passed a tax bill, leading an emboldened US President to declare he was “unbeatable” at the 2020 election.’ <snipped…> … Continue reading

4 Dec 2017 (AFR) – Sydney auction result points to ‘ongoing price weakness’

(4 December 2017, AFR, p10, by Larry Schlesinger) ‘This weekend’s weaker auction results pointed to further price falls in Sydney and the start of a possible downturn in Melbourne. CoreLogic preliminary figures show a 62.4 per cent clearance rate in Sydney on a big weekend of over 1100 auctions, down from last week’s preliminary figure … Continue reading

2 Dec 2017 (AFR) – ASX ends dramatic week on upbeat note as energy firms gain

(2 December 2017, AFR, p33, by Sarah Turner) ‘Australian shares ended Friday’s session on an upbeat note, with investors buying into energy stocks after a dramatic week that included the news of a royal commission into the financial sector.  The S&P/ASX 200 index added 19 points, or 0.3 per cent, to 5989, while the All Ordinaries index rose 0.3 … Continue reading

1 Dec 2017 (TheAge) – Bitcoin’s wild ride continues with 20 per cent plunge in 90 minutes

[COMMENT: Many traders and investors are becoming interested in trading cryptocurrencies such as Bitcoin (there are actually hundreds to choose from), but with speculation rife, and the Fear OF Missing Out (FOMO), it could be both dangerous and heart-stopping – as this fall in Bitcoin demonstrates.] (1 December 2017, The Age, Business, p22, Camila Russo, … Continue reading

1 Dec 2017 (TheAge) – ASX ends strong month with a whimper

(1 December 2017, The Age, Business, p25, Sarah Turner) ‘The ASX ended a strong month with a whimper on Thursday, after news of a banking royal commission sent shockwaves through the financial sector. The S&P/ASX 200 index dropped 41 points, or 0.7 per cent, to 5969, while the All Ordinaries fell 38 points, or 0.6 … Continue reading

1 Dec 2017 (AFR) – US bulls charge on but chatter over risk rises – As US equities ratchet ever higher, their peak edges ever closer

(1 December 2017, AFR, p32, by Timothy Moore) ‘The enduring expansion of the US economy and renewed reflation trade bet continue to encourage equity bulls even as chatter about the need for a correction rises. “Valuations are stretched, more so in US stocks,” Citigroup’s global asset allocation team said. That could limit upside returns going … Continue reading

1 Dec 2017 (AFR) – OrotonGroup collapses into administration – The latest retail casualty

(1 December 2017, AFR, p19, by Sue Mitchell) ‘The “rags to riches in three generations” adage has played out again. This time it’s family-controlled retailer OrotonGroup, which has fallen into administration. Sydney’s wealthy Lane family, the major shareholder in the upmarket accessories chain, must be regretting a decision 12 years ago to reject takeover offers from … Continue reading