How to analyse 2,139 stocks in less than 30 minutes

  • Just ask the Speaker
  • It just got worse for BHP
  • Higher and higher

It seems I should read my emails properly before blabbing about them.

In yesterday’s Port Phillip Insider, I explained how it takes Quant Trader editor Jason McIntosh less than 30 minutes to analyse all 2,139 of the Aussie market’s stocks using his powerful computer system.

Strictly speaking, it does take him less than 30 minutes…a lot less.

If I had read the email from Jason properly, I would have noted that it takes him 30 seconds (not minutes) to download the data, and then less than one minute for his computer to analyse the data.

Bizarrely, it means that it will likely take you longer to place a trade using Jason’s analysis than it would take his computer to analyse every stock on the ASX!

For a technological Luddite like your editor, we still don’t completely understand how it’s all possible. But it is possible.

And in next Tuesday’s LIVE training event, Jason will explain exactly how his system works, and how you could use it to potentially make big stock market profits.

If you haven’t yet signed up for this free and LIVE event, go here.

Markets

Overnight, the Dow Jones Industrial Average fell 84.03 points, or 0.45%.

The S&P 500 dropped 12 points, for a 0.55% fall.

In Europe, the Euro Stoxx 50 closed down 30.46 points, or 1%. Meanwhile, the FTSE 100 fell 0.68%, and Germany’s DAX index lost 0.58%.

In Asia, Japan’s Nikkei 225 index is up 158.93 points, or 0.96%. China’s CSI 300 index is up 0.1%.

In Australia, the S&P/ASX 200 index is up 3.02 points, or 0.05%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$46.33 per barrel. Brent crude is US$48.89 per barrel.

Gold is US$1,343 (AU$1,751) per troy ounce. Silver is US$19.80 (AU$25.81) per troy ounce.

The Aussie dollar is worth 76.73 US cents.

Just ask the Speaker

For the past two weeks, we’ve published a series of reader letters regarding the abolition of physical money and the digitalisation of cash.

We’ll suspend printing any more letters, for today at least. Because an interesting article appears in today’s Financial Times, which indicates the abolition of cash could move into a higher gear.

The FT reports:

The idea of keeping piles of cash in high security vaults may sound like something from an old movie plot, but some banks and insurers have recently started considering the idea as interest rates sink below zero across much of Europe.

Europe’s highways are not yet jammed with heavily guarded trucks transporting money to top-secret locations, but if it becomes financial sensible for banks to hoard cash as rates are cut even further, the practice could undermine central banks’ ability to use negative rates to boost growth.

European central bankers say they could cut rates again should economic conditions worsen, but private bankers and insurers are already thinking of creative ways to avoid those charges altogether.

One way is by turning the electronic money they keep at central banks into cold, hard cash. Munich Re has experimented successfully with storing a double-digit million sum of euros in cash at what the insurer describes as a manageable cost. A few other German banks, including Commerzbank, the country’s second biggest lender, have also considered taking the step. But when a Swiss pension fund attempted to withdraw a large sum of money from its bank in order to store it in a vault, the bank refused to provide the cash, according to local media reports.

There you go.

It’s not just the crazy tin-foil hat brigade that is hoarding cash. Big banks and insurance companies are too.

Instead of holding electronic reserves at the central bank — and have the central bank charge them a fee for doing so — the banks would rather hold physical bank notes in a vault.

But what isn’t surprising is that some banks aren’t necessarily allowing their customers to do the same thing.

The banks are happy to hold physical cash rather than electronic reserves, because it should be a zero sum game in terms of holding reserves: one dollar of cash at the central bank is the same as one dollar of cash in a vault.

However, a dollar of a customer’s money in a bank account isn’t the same as a dollar of a customer’s money in a private vault.

In order for a bank to extend loans to customers, it must have a notional amount of cash and other assets held as reserves. That can be cash at the central bank, government bonds, corporate bonds, gold, or other approved securities.

But if big customers start to withdraw cash because they don’t want the bank charging them a negative interest rate, well, that means a reduction in the bank’s reserves.

That’s not good.

So while the banks may like the idea of holding physical cash in their vaults, they won’t be so keen to allow others to do the same.

Besides, if you’ve ever tried to withdraw even a few thousand dollars in cash from a bank, you’ll know the grilling you face.

The teller or bank manager will ask you what the money is for, and if you tell them it’s none of their business, they can report the withdrawal to a government agency (in Australia it’s AUSTRAC) if they believe there is anything to be suspicious about.

Remember, just because the money in your bank account is in your name, it doesn’t mean you can do with it as you wish.

What happened to former Speaker of the US House of Representatives, Dennis Hastert, is a case in point.

The short story is that, while he was a teacher many years ago, Hastert sexually assaulted a boy at the school.

Sometime later, the boy (then an adult) demanded cash as hush money.

Hastert paid him the cash, totalling $1.7 million spread across several payments.

As a result, Hastert was tried, convicted, and is now serving a jail term.

However, he isn’t in jail for sexual assault.

He’s in jail due to the manner in which he withdrew the $1.7 million from the bank.

Instead of drawing the cash as a lump sum, Hastert ‘structured’ the withdrawals in amounts less than $10,000 — the amount at which banks have to report the withdrawals to government agencies who may wish to investigate potential money laundering activities.

However, Hastert didn’t appear to realise that even withdrawals of less than $10,000 can still be reported by the bank — if they suspect wrongdoing.

That was Hastert’s problem. When the bank and federal government officials asked him about the reason for the withdrawals, he lied. He said that he just didn’t trust the banks (in our view, a fair answer).

But when he later admitted the real reason for the withdrawals — to pay hush money — that’s where things got even worse for him. The government charged him with ‘structuring’ payments to fall below the reporting threshold, and for lying to the Federal Bureau of Investigation.

As the New York Times reported last year:

Dennis Hastert has not been indicted on a charge of sexual abuse, nor has he been indicted on a charge of paying money he was not legally allowed to pay. The indictment of Mr. Hastert, a former House speaker, released last week, lays out two counts: taking money out of the bank the wrong way, and then lying to the F.B.I. about what he did with the money.

Ultimately, the government dropped the second charge, but the first stood. Hastert will be in jail until late 2017. Not for sexual abuse, but for withdrawing his own money from the bank.

Gives you something to think about, doesn’t it?

When central banks and governments abolish all cash, it will be much, much easier for them to track what you do with it.

It just got worse for BHP

On other matters, what a year for BHP Billiton Ltd [ASX:BHP].

Last year, the big Aussie miner recorded a ‘measly’ profit of US$1.9 billion. It was a long way from the profits the company made at the peak of the mining boom.

In 2011, BHP recorded a staggeringly huge profit of US$23.6 billion.

That was on revenues of US$71.7 billion.

But if investors thought last year was the worst of it for BHP, they were wrong. The latest annual result shows an even bigger drop in profitability.

According to the results released yesterday, BHP raked in US$30.9 billion in revenue for the 2016 financial year. However, from that it recorded a loss of US$6.4 billion.

How quickly fortunes turn.

Higher and higher

We’ve long ago given up on trying to understand the Melbourne and Australian property markets.

In 2008 and 2009 (and 2010!), we thought Aussie house prices would crash. We were wrong…in a major way. So now we just look at the Aussie housing market in wonder.

And when it comes to predicting house prices, we leave all of that to Phil Anderson and his team in Cycles, Trends & Forecasts.

Still, we couldn’t help but feel something (we don’t know what) when reading the following in an article on The Age’s Domain website:

The celebrity couple paid $3.6 million for Melville in 2000, reportedly investing that amount again on a refurbishment, before selling it in 2007 for $8.8 million to locals. They, in turn, on-sold it to the current vendors for $10.1 million in 2009.

And now, Shane Warne (yes, Warney, I admit it, that’s what caused me to click on the story in the first place) is buying the place for $14–$16 million.

Bear in mind, that the ‘celebrity couple’ was Warney and his then wife who bought it for $3.6 million in 2000, and sold it for $8.8 million in 2007.

It’s staggering. Or is it?

If we assume the folks who bought it in 2007 didn’t do any work on the place, they sold it for a $1.3 million profit after two years. That’s a 14.7% gross return on their investment, or around 7% annualised.

As for the folks who just sold it to Warney, they’ve locked in a 58.4% profit (assuming the higher sales number). Annualised, that’s around 8.3%.

It’s nothing to sniff at. But it also supposes no mortgage costs. It also doesn’t include stamp duty or agent costs. If the owners paid cash, they’ve got a nice tax-free return.

But regardless of income, most folks don’t pay cash. The bigger the bank balance, more than likely, the bigger the mortgage. So, despite being 100% wrong on the Aussie property market, we’re still not convinced it’s the slam-dunk winner the property spruikers would have you believe.

Still, will there ever be an end in sight for Australia’s seemingly unstoppable property price rises? Phil Anderson says: Not just yet.

Based on everything we’ve seen over the past eight years, he could be right. Staggering.

Cheers,
Kris