Why 2017 could be a ‘very good year’

  • The ‘wake up’ call moment
  • Most analysts take the ‘safe’ view
  • This industry is booming and will keep going
  • The billionaire’s fund just cut in half

It’s Callum Newman writing to you today.

If my name isn’t familiar, I’m the editor of Money Morning Trader, and associate editor of Cycles, Trends and Forecasts and Time Trader.  

Your regular editor, Kris Sayce, is taking a day off. I’ve jumped at the chance to write to you.

That’s because I think 2017 could be a very good year for stocks. I want to spread the word. It’s a time to get bullish. Get excited by the opportunities coming! I am.

I’d like to take a step back in time for a moment and show you a picture. But before I do, let’s quickly recap all the market action.

Markets

The Dow Jones Industrial Average rose 64.51 points, or 0.32%, over the weekend.

The S&P 500 rose 7.98 points, or 0.35%.

In Europe, the Euro Stoxx 50 index rose 4.7 points, for a 0.14% gain. Meanwhile, the FTSE 100 added 0.2%, and Germany’s DAX index gained 0.12%.

In Asian markets, Japan’s Nikkei 225 index is down 66.36 points, or 0.34%. China’s CSI 300 index is up 0.43%.

In Australia, the S&P/ASX 200 is up 54.1 points, or 0.94%.

On the commodities markets, West Texas Intermediate crude oil is US$53.78 per barrel. Brent crude is US$56.93 per barrel.

Gold is trading for US$1,177.40 (AU$ 1608.03) per troy ounce.

Silver is US$16.54 (AU$22.58) per troy ounce.

The Aussie dollar is worth 73.2 US cents.

The ‘wake-up call’ moment

Here it is…



chart image

Source: Australian Financial Review
Click to enlarge


This was the picture on the front page of the Australian Financial Review after the dip in Australia’s quarterly GDP figures came out.

This was before Christmas. I brought this same picture to the attention of Money Morning Trader readers at the time. This was on 7 December last year.

Perhaps you saw this at the time. Did you worry? Did you sell stocks, or think about it?

A front page like that looks a cause for concern at least, doesn’t it? This is why investing and trading can really mess with your mind. 

In fact, at the time this came out, the Aussie market was already moving into a Christmas rally that’s still running today. The market is always looking beyond the immediate news.

Take a look…



chart image

Source: Optuma
Click to enlarge


The market has barely had a day down since. From the low on 5 December, the market is now up 400 points at the time of writing. It’s up 20% since Feb 2016 — and therefore ‘officially’ a bull market now. The market looks to be pricing in a bullish 2017.

And why not? Major indices worldwide are at all-time highs. Real estate markets are rising globally, too. And it’s worth noting that Australia’s mineral and energy exports are on track to hit a record high in fiscal 2017.

Most analysts take the ‘safe’ view

Now you might be tempted to take the ‘contrarian’ position here and assume things are on the brink of reversing. But actually, most analysts I see in the mainstream are predicting the share market will run out of steam in 2017.

That’s the ‘safe’ view, in the sense of not shocking anyone or being seen to be out of the herd.

Hopefully, as a Port Phillip Publishing reader, you know never to trust the mainstream view.

You simply won’t make money doing that.

Over at Cycles, Trends and Forecasts we’ve been bullish on the global economy since we began in 2014. We’ve even gone on record predicting the biggest worldwide boom of all time

You only have to look at one bellwhether industry to see huge and wonderful developments building to an unprecedented scale: aviation and tourism.

There are a huge number of people travelling now. The Chinese for one are already everywhere, even when most of those at home still don’t have passports.

This industry is booming, and will keep going

Here’s some of what’s happening here to give you an idea…

Rolls Royce intends to double annual production of its jet engines to 600 a year by 2020. That’s more than any other time since the Second World War.

In Alaska, there aren’t enough pilots to fly their planes in and out of the territory. Retirees and the growth of aviation in Asia has led to a critical shortage of pilots that is now global in scope.

The government of Dubai is currently building a US$32 billion, five runway ‘megahub’ for Emirates airline. When it’s finished, it will have four times the capacity of New York’s JFK airport.

Speaking of New York, La Guardia airport is seeing a US$4 billion overall upgrade to its tired infrastructure.

Airports all around the world will need to upgrade to cope with the huge demand that will come from China in the years ahead. And what happens if the middle class in India start travelling? The mind boggles.

To understand the staggering potential of Chinese tourism, just consider the case of Kidlington in the United Kingdom. There are bus tours full of Chinese travellers turning up to this sleepy English village and marveling at the most innocuous things.

Consider this report from the New York Times last month…

The Chinese visitors fanned out of a tour bus, and suddenly stopped, transfixed, as if marveling at the Venus de Milo or the Eiffel Tower.

Then they began photographing an unremarkable 1970s suburban home, an oak tree, a rosebush and a garbage bin.

Ever since busloads of Chinese tourists began arriving in this sleepy, nondescript English village this summer, the 13,723 residents of Kidlington, about five miles north of Oxford, have been variously baffled, annoyed and delighted.

The sudden influx of Chinese has also grabbed headlines and spawned a national mystery.

Why, for example, do the Chinese tourists ignore the village’s handsome 13th-century church and its thatched-roof cottages, preferring instead to peer through windows, film parked cars and traipse on the lawns of Benmead Road, a humdrum and modern residential street?

One tourist asked a stunned resident if he could help mow her lawn. (She politely declined.) Another jumped joyously on a child’s trampoline in the front yard.’

Imagine the wonder for some of the Chinese that have lived through the transition from an impoverished agrarian economy to being able to fly around the world. They will keep travelling and exploring for years.

Jim Rogers, the headline speaker at the recent Great Repression conference, told me personally on my podcast that Chinese tourism will be one of the great growth industries of the next decade.

And make no mistake. Investing is all in the timing — when to be in and out of the market. And that’s what we study over at Cycles, Trends and Forecasts.

We said clear as day last year that 2016 would be good for property, as an example. Australian houses increased at their fastest pace in seven years in 2016, according to Bloomberg.

Come and see how we did that here

The billionaire’s fund just cut in half

You could do a lot worse, I can assure you. Take UK billionaire Crispin Odey. Here’s been an uber-bear for a long time now. His fund lost 49.5% in 2016. He positioned for the UK economy to decline into a recession, and thought UK stocks could possibly go down 80%.

In fact, they hit all time highs over Christmas.

The Independent newspaper quoted this:

Jacob Schmidt, chief executive officer at investment advisory firm Schmidt Research Partners, told Bloomberg:

“Even if his assessment is correct, the problem with ultra-bearish bets is the timing [emphasis mine]. “As per JM Keynes, the market can remain irrational longer than you can remain solvent,” he said, referring to a comment by the famous economist. “Minus 50 per cent is a very serious drawdown.”

Yep, there’s that word again, timing. Some say it can’t be done in the market. I beg to differ.

By the way, we’re not claiming we always get it right over at Cycles, Trends and Forecasts. Far from it. In fact, a lot of what we write about isn’t even original.

It’s built on the work of several men — land market experts Homer Hoyt and Fred Harrison especially — who came and went long before we did. All I can say is this knowledge changed the way I looked at the world, and thought about investing. I’m not alone. Many of our subscribers are the same. Check it out here.

Here’s to a big year coming up!

Best wishes,

Callum Newman