Climate change: A bunch of globalist elite junk…

  • Buy gold (and a gold seminar ticket)
  • 40 cents for the Aussie
  • ‘Tiny stocks’ keep marching higher
  • Queen’s birthday
  • In the mailbag

Australia’s prime minister gravely warns, according to the Sydney Morning Herald:

Mr Turnbull cautioned against attributing any single weather event to global warming but said local Devonport families who have been in the area for generations know it “better than anyone” that there has not previously been flooding of the scale experienced in recent days.

“They have never seen as much water move as quickly as this. And so what this means is that you cannot — you’ve got to assume faster, more frequent tempests in the future and do that out of prudence. Put your preparations in place, all of us have to do that, and hope to be disappointed,” he said.

Or you can understand that ‘climate change’ is a bunch of junk, invented by globalist elites and socialists, as a neat way for them to manage the transfer of wealth from the middle classes to those in power.

No kidding. Of course, your editor’s view on climate change is simple: we don’t know if it’s a genuine threat or not. Our solution? Let the free market decide.

We’ll concede that most people do believe that climate change is a threat. In that case, why does the government need to get involved? Most people would gladly do things to reduce pollution and other things that may (or may not, nothing is proven) reduce the causes of climate change.

The trouble is, the government taxes so much, and wastes money on so much, that most folks don’t have enough cash left in their pockets to do something about it.

It’s not hard. If climate change is a real threat, and if people really believe it’s a threat, the government should get out of the way and let the people make their own decisions on what to do about it.

Oh, and one last thing, Mr Turnbull says that people in Devonport have ‘never seen’ as much water as this. We’ll remind him that even if ‘generations’ of the same family have lived there, we’re talking about, what, 80 years…100 years…120 years.

We would argue it’s quite conceivable that at some point during the last few millennia, water has moved as fast — and perhaps faster — through that area.

Climate change? Pah!

Markets

Overnight, the Dow Jones Industrial Average fell 19.86 points, or 0.11%.

The S&P 500 index fell 3.64 points, or 0.17%.

In Europe, the Euro Stoxx 50 index fell 30.73 points, for a 1.02% drop. Meanwhile, the FTSE 100 lost 1.1%, and Germany’s DAX lost 1.25%.

In Asian markets, the Nikkei 225 index is down 115.58 points, or 0.69%. China’s CSI 300 index is down 0.41%.

In Australia, the S&P/ASX 200 index is lower by 53.33 points, or 0.99%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$50.15 per barrel. Brent crude is trading for US$51.54.

Gold is US$1,267 per ounce, while silver is US$17.20 per ounce.

The Aussie dollar is worth 74.15 US cents.

Buy gold (and a gold seminar ticket)

A note from our friends at ABC Bullion.

On Tuesday, 26 July, from 5:30pm to 8:30pm, they are holding an investor seminar titled, ‘The New Bull Market in Precious Metals!’

Do we really think the seminar would be titled anything else?

The good news is that they’ve kindly offered Port Phillip Publishing subscribers a 25% discount on the ticket price. Tickets that would normally cost $25 will only cost $18.75…but only if you use the promo code POPP16.

To register, go here.

Colleague Greg Canavan tells me that he plans on getting along too. So if you go, make sure you pester Greg. Surround him and fire questions at him point blank. He’ll like that.

(Note: We don’t receive any kind of fee or kickback from mentioning this event. We simply do so in the spirit of goodwill.)

40 cents for the Aussie

Here’s news that should send a shiver through the spines of Aussies planning an overseas break. From Bloomberg:

A fund manager who predicted before most economists that the Reserve Bank of Australia would cut its benchmark below 2 percent, says there’s a risk that the Aussie dollar could almost halve to an unprecedented 40 U.S. cents, a level significantly below where most forecasters see the currency.

BT Investment Management’s Sydney-based head of income and fixed interest, Vimal Gor, who oversees the equivalent of about $11 billion, said in a newsletter published Thursday that the outlook for the currency was “worrying” and that his previous view on it had been overly optimistic.

Where is this newsletter containing Mr Gor’s outrageous prediction?

We would like to know, because that’s a statement which should have been in one of our newsletters. We do, after all, pride ourselves on making seemingly unlikely predictions…and then, against all odds, finding out that some of them come true.

But while Mr Gor’s prediction may seem outrageous, is it really so?

As we check out the long term chart of the Aussie dollar, we can see that in the early 2000s, the Aussie dollar came within a short-armed stone’s throw of the 40 US cent level:



chart image

Source: Bloomberg
Click to enlarge


In 2001, the Aussie dollar hit a low just below 48 US cents. That was the end of a long term downtrend, which began in the early 1970s.

What halted the decline? Why, the resources boom of course. Even though most commodities are priced in US dollars, Australia’s central role in the resources sector meant a huge increase in exports.

And as exports increased, Aussie mining companies converted cash from US dollars back into Aussie dollars — in order to pay wages, dividends, and locally sourced equipment and supplies.

That trend continued, until the Aussie dollar (and the commodities sector) hit a peak in 2011. From there, it has been mostly downhill all the way.

If you ignore the period of the resources boom, the Aussie dollar is now trading around the level that it was in September 1997. From there, before the resources boom struck, the Aussie dollar continued to fall — until it hit that rock bottom level just under 48 cents in 2001.

Furthermore, is there anything to stop the Aussie dollar falling further?

It’s hard to think what could. Despite the Reserve Bank of Australia’s (RBA) decision to do nothing with interest rates this week, the market has still priced in a greater than 50% chance of the RBA cutting rates by October.

If it does so, the Cash Rate will be at 1.5%, the lowest rate on record — ever.

In such a circumstance, what will attract investors to the Aussie market, and into Aussie bonds? Especially as, in such a circumstance, Australian government bond yields will be even lower than they are today.

Today, an investor in Aussie government bonds can get no better than a 1.62% yield on a two-year bond.

If the RBA Cash Rate falls to 1.5%, what would that mean for yields? 1.4%, 1.3%. How long until zero?

As always, we shall keep watching with a good deal of interest.

‘Tiny stocks’ keep marching higher

It’s a bad day for ‘tiny stocks’. Only seven on the ASX have gained 50% or more today…in a single day:



chart image

Source: Bloomberg
Click to enlarge


I’m only kidding. It’s not a bad day at all. It’s just another example of the phenomenon of ‘tiny stocks’. As I write, the Aussie blue-chip index is down around 1%. Yet, a bunch of tiny stocks are up 20% or more.

It’s odd how these things can play out. It goes against everything most people think they know about stocks.

They’re told that blue-chip stocks are safe, and that ‘tiny stocks’ are super high risk. The bit about ‘tiny stocks’ is true — they are super high risk.

The thing is, the bit about blue-chip stocks isn’t necessarily true. They aren’t always safe. In fact, we argue that in perceived safety there is more risk than most investors realise.

We’ll explain that thought in more detail next week.

Queen’s birthday

A short note to let you know that the Port Phillip Publishing office will be closed on Monday, in observance of the Queen’s Birthday public holiday.

Normal service will resume on Tuesday…providing we can all drag ourselves back into the office after celebrating the ceremonial birthday of Elizabeth II Regina.

In the mailbag

Readers Therese and Peter dropped us a line:

Hi Kris,

Both my husband and I have read your article and are disgusted with your poor attitude towards the farmers. We always thought highly of you and what you are writing. This article however beggars belief. We have migrated here from Switzerland and know how important farming is to a country. It looks as if we care and love this country more than many locals do. We also have friends that are farmers. They are doing a fantastic job providing food for the nation with little profit and appreciation and against immense odds like our weather etc. Do you know how high the suicide rate is amongst farmers? Is this not a tell-tale sign that something is terribly wrong in this sector? Also, if the farmers get of their land who will provide for us (the chemical industry???) and furthermore a farmer lives, eats and breaths his land, what else are they going to do. I always make sure to buy brand milk and not the no frills cheap rubbish from the big 2. We could not agree more than what Mike W. writes.  Anyway, you seem like many people wanting produce dirt cheap from China and that could give a damn what happens to our farmers. Shame on you!

The letters supporting the dairy industry keep coming. But none of them understand the key points.

Problems faced by the dairy industry have three sources of blame: the dairy farmers who over-borrowed and overinvested in capacity, the co-ops that overinvested in capacity, and governments that insist on interfering in the market.

We’re sympathetic towards anyone driven to suicide, but that doesn’t mean the consumer should pay levies or other taxes in order to bail out a mismanaged industry.

Cheers,

Kris