Good news and bad news for Aussie property

  • Box office closed
  • Doors open…for now
  • Not as wealthy as we think
  • What else? Try this…
  • In the mailbag

Good news. Bloomberg reports:

Australia’s low unemployment rate should allow National Australia Bank Ltd. to maintain asset quality and prevent any spike in bad-debt levels, according to the bank’s chief executive officer.

Bad news. Bloomberg reports:

The strength of Australia’s jobs market is being overstated by a surge in casual positions and an inability by workers to secure more hours.

While the unemployment rate fell to 5.7 percent in July from 6.3 percent a year earlier, 87 percent of the jobs created in that period were part-time: a definition that covers anything from 1 hour a week to 35 hours. At the same time, the underemployment rate is stuck near a record high of 8.5 percent.

What is an investor supposed to make of that? The top brass at one of Australia’s biggest banks says everything is fine. Meanwhile, a gentle dig beneath the surface of the jobs numbers suggests maybe thinks aren’t fine after all.

We don’t know what to make of it, or even whether we should make anything of it.

So we’ll just keep our eyes firmly peeled, and remain on the heightened state of alert that we’ve been in for the past eight years…

Markets

Overnight, the Dow Jones Industrial Average fell 53.42 points, or 0.29%.

The S&P 500 index fell 5.17 points, or 0.24%.

In Europe, the Euro Stoxx 50 index dropped 7.62 points, for a 0.25% fall. Meanwhile, the FTSE 100 fell 0.58%, and Germany’s DAX index lost 0.61%.

In Asian markets, Japan’s Nikkei 225 index is up 10.92 points, or 0.06%. China’s CSI 300 is down 0.13%.

In Australia, the S&P/ASX 200 is down 15.53 points, or 0.29%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$44.90 per barrel. Brent crude is US$47.09 per barrel.

Gold is US$1,311 (AU$1,739) per troy ounce. Silver is US$18.73 (AU$24.85) per troy ounce.

The Aussie dollar is worth 75.39 US cents.

Box office closed

Ticket sales for the 2016 Port Phillip Publishing investment conference, The Great Repression, have officially closed.

That’s it. If you’ve registered to attend, great. I look forward to seeing you in Port Douglas this October.

In the meantime, stand by for further announcements about the conference. The full speaker schedule is lined up, and we’ll release it to conference goers over the next few weeks…just so you can start to feel the excitement.

Stay tuned.

Doors open…for now

While the doors to the conference may be shut (for those who didn’t book a ticket before midnight last night), the doors for our premium Quant Trader service are still wide open.

They are for now, anyway. Although, don’t dwell too long. We’re only accepting new memberships for this current intake until Monday.

After then, you likely won’t be able to secure a Quant Trader membership until next year. I’d hate to think that you’ll miss out on one of our most popular trading services, just because you didn’t find the time to check it out.

So, before you do anything else — before you even finish reading today’s Port Phillip Insider — I urge you to look at the great work Jason McIntosh is doing in Quant Trader.

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It has an incredible trader at the helm of the service.

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Each alert tells you the stock code, the stock name, the suggested entry price, and an initial stop loss price.

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Not as wealthy as we think

If you think the outlook for the Aussie economy is looking rough, spare a thought for the home of this year’s Olympics, Brazil.

As the Financial Times reports:

Brazil’s Senate voted overwhelmingly on Wednesday to impeach President Dilma Rousseff in a historic decision that ends nearly 14 years of rule by her leftwing Workers’ party in Latin America’s largest country.

The removal of the former Marxist guerrilla for manipulating the budget thrusts her replacement, interim president Michel Temer, into the spotlight at a time when the country is suffering what is expected to be its worst recession in over a century.

And how did Brazil’s stock market react? The iBovespa index closed this morning down 674 points. But that’s not such a big drop, seeing as the index is at 57,901.11. It works out as just over a 1% fall.

In fact, over the past five years, Brazil’s market has held up remarkably well, despite the onslaught of a major recession. The index is up 5.3% since late 2011.

However, that’s the return in Brazilian reals. If you measure the index performance in an external currency, such as the US dollar, it’s a different story.

The chart below shows you the iBovespa index in US dollar terms:



chart image

Source: Bloomberg
Click to enlarge


Instead of being flat, the index is down 46.3%. So even though Brazilian investors may have ‘held their own’ in local currency terms, in global currency terms, their wealth has halved.

That’s not what you’re after when you’re trying to make money.

Interestingly, before Aussies point the finger and laugh at the hapless Brazilians, it turns out Aussies aren’t quite as wealthy as they thought.

Since 2011, in Aussie dollar terms, the S&P/ASX 200 index is up a handsome 30.8%. The trouble is, when you measure the performance in US dollars, that gain disappears…plus a bit extra.

In US dollar terms, the Aussie index is down 6.6%.



chart image

Source: Bloomberg
Click to enlarge


Of course, this isn’t the fault of any Aussie investor. This is all part of the worldwide currency wars that have played out for more than five years now.

And with central banks diverging on where they’re taking interest rates, it doesn’t seem likely that the currency wars will end anytime soon.

But heck, what do we know? The top dog at NAB is positive about the Aussie economy and the ability of Aussies to withstand any problems, so why shouldn’t we be positive too?

Probably because we just can’t help but be sceptical.

On the surface, the Aussie unemployment numbers look great. But just below the surface they don’t look so great.

On the surface, the Aussie stock market performance looks great. But just below the surface it doesn’t look so great.

So what else is there? What else is there about the Aussie economy that appears perfectly fine, but hides a much less encouraging story?

What else? Try this…

More news from Bloomberg:

Australia 2Q business investment fell 5.4% Q/Q; est. 4% drop

More bad news beneath the surface? Based on the above, there’s every chance it’s even worse than the headline suggests.

In the mailbag

A reader, David R, writes in response to our comments on American Football star, Colin Kaepernick, and his refusal to stand during the national anthem:

Stick to the financial commentary. You appear good at that.  Military people wear their uniforms because they are just that “uniforms”. Just like bus drivers, nurses, tradies (hi vis!) wear their uniforms every day. Generally speaking the only military people you will see wearing uniforms in public are those members going to and from work or attending an official function.

Two things. First, there must be a heck of a lot of sporting venues directly in the path between the homes of military personnel and their military base.

And if ‘going to and from work’ involves resting on the way at a baseball game for three hours, eating popcorn and drinking beer, then heck, maybe David is right, they are just going to and from work.

But aside from that, we’re not sure we’ve ever seen a nurse in full hospital scrubs on their way for a night out on the town, or sitting in the stands at a football match.

The same for bus drivers. We’re struggling to think of a time we’ve seen a bus driver or train driver sat in the stands of a sporting event in full bus or train driving attire, peaked cap and all.

Another reader, Christine, appears to be sympathetic with our view:

I think Kaepernick is being manipulated by the US media to look bad, as if you read a larger extract of his interview (there is one on Zerohedge) he criticizes Trump and Clinton and then criticizes Obama saying there has been no progress for blacks despite having a black president.  Even though he said Trump was a racist, the media couldn’t use the quote if he was trashing Clinton, who pays them. Better to make him a traitor than encourage blacks to see what’s really going on.

We can’t really argue with that.

It’s hard to imagine any well-paid US media personality taking on the might of the US military.

But we’ll be interested to hear the reaction of the crowd when Kaepernick takes the field for the San Francisco 49ers tomorrow afternoon Australian time.

Of all the coincidences, the 49ers are playing in San Diego, against the San Diego Chargers. It just so happens that San Diego is the home base of the US Pacific naval fleet.

Even more coincidentally, the game has been marketed as ‘military appreciation day’. So let there be no doubt about the link between the military and sports.

Your editor spent a few days in San Diego two years ago. On the drive from Los Angeles, you see a regular stream of military vehicles on the freeway. You also drive past a military base and range, where you can see more military vehicles.

For several games each year the local baseball team, the San Diego Padres, wear military fatigue-style uniforms. Shots of the crowd frequently include army and navy personnel in full ceremonial dress uniform.

The military is a powerful lobbying group. And few if anyone in the mainstream will dare to speak out against it. For that alone we say ‘Hats off’ to Colin Kaepernick.

And double ‘Hats off’ for his refusal (so far) to back down from his comments.

Cheers,
Kris