The Turnbull ‘Gas’ trade?

  • What if he’s wrong?
  • In the mailbag

This news will warm the cockles of colleague, and Head of Research, Greg Canavan. From Bloomberg:

Prime Minister Malcolm Turnbull said Australia should consider greater use of gas and hydro to ensure more reliable sources of electricity as the nation’s biggest state prepares for possible power shortages Friday amid record temperatures.

“We need to have energy that is affordable, that is reliable,” Turnbull said in a radio interview Friday. Australia needs “a roadmap to a technology-agnostic and an all-of-the-above approach to energy policy” with greater access to natural gas reserves and more pumped-hydro projects among options that need to be considered, he said.

This is exactly what Greg has been banging on about.

There is a huge ‘crunch’ in the Australian eastern states’ power market. The moratorium on onshore drilling in New South Wales and Victoria, plus lower-than-expected output from Queensland’s coal seam gas (CSG) fields, is forcing gas from elsewhere in Australia to get sucked into the export facilities at Curtis Island, and then shipped overseas.

The ‘greenies’ have done it again. In their desperation and fanaticism to shut down the Aussie fossil fuel industries, they’ve left millions of folks on the east coast at threat of severe power shortages.

Forecasts are for Sydney’s western suburbs to hit 44 degrees tomorrow. Folks hoping for respite from the heat are likely to find the ‘green army’ have ensured that won’t happen.

The only bright side to this environmental terrorism, is the potential for an investment opportunity. That’s what Greg has researched, studied, and analysed for six months or more.

The details, in his own words, are here.

Markets

Overnight, the Dow Jones Industrial Average gained 118.06 points, or 0.59%.

The S&P 500 added 13.2 points, or 0.58%.

In Europe, the Euro Stoxx 50 index closed up by 39.75 points, or 1.23%. Meanwhile, the FTSE 100 gained 0.57%, and Germany’s DAX index rose 0.86%.

In Asian markets, Japan’s Nikkei 225 index is up 445.09 points, or 2.35%. China’s CSI 300 is up 0.4%.

In Australia, the S&P/ASX 200 is up 51.49 points, or 0.91%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$53.04 per barrel. Brent crude is US$55.64 per barrel.

Gold is US$1,224.29 (AU$1,601.01) per troy ounce. Silver is US$17.58 (AU$22.99) per troy ounce.

The Aussie dollar is worth 76.47 US cents.

What if he’s wrong?

Tinker here, tinker there. That’s the job of a central banker.

From Bloomberg:

Australia’s central bank Governor Philip Lowe said he uses a framework involving interest rates and the economic-growth outlook — currently 3 percent for this year and next — to assess whether the local dollar is at an appropriate level.

It continues:

Against that backdrop, “it’s hard to say that the exchange rate is fundamentally too high,” he said in response to a question after a speech in Sydney Thursday evening.

The Aussie dollar has put in a rip-roaring run since the start of the year. It’s up 6.4%.

Although, in fairness, it’s now only just recovered to where it was immediately prior to the US election result last year.

In the weeks following Trump’s election win, the US market soared, the gold price fell, and the US dollar strengthened. All on the basis that newfound economic growth under Donald Trump would allow the US Federal Reserve to increase interest rates.

But on the Aussie dollar specifically, we can’t help but think that the RBA and investors are being overly optimistic about the strength of the Aussie economy.

Colleague, Shae Russell, who helms the Currency Wars Trader service, dropped your editor a line this week with her take on the state of the Aussie economy.

Here it is in full:

I read yesterday’s Port Phillip Insider, where you talked about slowing retail figures indicatimg a recession is on the way. I’m not sure if you’re writing about it again in PPI today, but if you do, here you go.

(Great article btw.)

OK, we couldn’t resist reprinting that great bit of brown-nosing from Shae. But on with the email…

But, don’t you think it’s weird that as a country, we use consumption statistics to tell us there’s a recession coming our way? What they don’t realise, is that the recession is already here. It has started in small pockets around Melbourne. I get to that at the bottom.

A quick Google search gives plenty of results where the media comment on retail stats. However if you Google Australia’s manufacturing data, the top link takes you to Trading Economics, and if you go to Google news, one link is about Oz PMI data (but it’s buried deep in the article)…yet the rest of the top news links are all about China’s PMI data.

What’s wrong with this picture? How the hell did Chinese PMI become more important than what we produce? Because we do nothing other than dig up rocks for export and import things to fill our enormous houses, which we are never in. Our economy is distorted.

Take a look at the recent retail companies that have filed for administration/bankruptcy. Dick Smith and Pumpkin Patch spring to mind. OK, you can make the argument that neither adjusted to changes in the global economy, and Pumpkin Patch was a victim of international stores setting up shop here.

But the story is bigger than that. During the mining boom, most mature retail businesses produced growth the only way they know how: expansion. Their market didn’t change, however they opened store after store — generally funded by credit. They cannibalised their existing store sales for the sake of increasing their store footprint. David Jones is a classic example of this. In the late 90s, there was only one DJs store in Melbourne. As the mining boom took over — and under Mark McInnes direction — suddenly there was a DJs in most top tier shopping centres.

Another example is Howards Storage World. They went into administration in late 2016. I love plastic containers as much as the next person. However a $150 rubbish bin might have seemed like a worthwhile purchase when the mines couldn’t get the copper/iron ore out of the ground quick enough. Now, that seems like a stupid waste of money. I’ve never owned a rubbish bin that cost more than $30. The point is, when we felt wealthy, other people felt this was a money well spent.

There have been several retail brands that went into receivership last year. Two more (Marcs/David Lawrence) at the start of this year. Mark McInnes once said you can tell you all you need to know about the retail market from what he called ‘the kiddie index’. He argued that women (as they are the main consumer), stop spending on their house first. Their husbands second. Themselves third. And their children last. His point is, women will only ever, ever stop spending money on their kids as a last resort.

So when places like DJs, Myer and Target report lower spending on things like kids clothes and toys, that’s when you know the economy is screwed.

The recession is already here. The thing is, it’s not showing up in the numbers.

I know of a few people who ran small retail businesses for the past 3–5 years. They were sort of like your boutique shopping strip stores. Anyway, as their leases expired during 2016, they all made separate decisions to not renew the lease. Each person I spoke to said the same thing. Rents are increasing, but fewer and fewer purchases were made. In other words, their recession began early. It hasn’t shown up in the dominant retailers yet because they can absorb the losses…for now.

Anyway, if gave me an idea for my next trade for Currency Wars Trader — which will be to [redacted].

The next Currency Wars Trader alert will be out soon. And with the Australian Bureau of Statistics due to release Aussie GDP numbers at the end of this month, placing trades on the prospect of a recession could be the best move you’ll make all year.

Details on what we call the ‘Big Australian Short’ are here.

Shae could have added the misfortune of luxury shirt retailer, Herringbone and Rhodes & Beckett, going into administration.

As ABC News notes:

The Australian Retailers Association has warned increased competition, the high cost of rents and weekend penalty rates have played a dominant role in the collapse of several prominent fashion brands.

It’s clear what’s happening. Aussie businesses can’t compete, even those at the top end. Any business traveller with any sense will use an overseas business trip as an opportunity to top-up on a shirt or two.

Why wouldn’t you, when the costs are 30% less than buying in Australia?

But the retail sector is just part of the problem. Governor Philip Lowe and his model may be right about the value of the dollar when the economy is growing at 3%.

The problem is, what happens if the model is wrong about the strength of the Aussie economy? Anything less than 3% growth, especially if it’s a contraction, will surely see the Aussie dollar sink.

We wait for the GDP number with interest. While you’re waiting, check out how you can potentially make a bob or two. Go here.

In the mailbag

It’s getting worse. More money is about to flow out the doors. Batten down the hatches!

This from subscriber, Phil M:

Poorly thought editorials, such as your effort on climate change the other day, are making me reconsider my subscriptions to PPP. A cursory check would have exposed the source as fraudulent very quickly. Frankly, the fact you even considered referencing the Daily Mail makes me very wary. What’s next — National Enquirer?

If you are willing to apply such loose standards to research, I am starting to doubt the financial research as well.

Suggest you stick to market analysis.

This from Daniel M:

Your recent missives on climate change have made me aware of the truth about Port Phillip Publishing. Your diatribes about climate change are just a prelude to warming up your spam email list with a link to another interminable video promising a 7,294% gain, only to end with a request to pay a small fortune for a subscription service which recommends a junior coal miner which Port Phillip associates have already bought a massive stake in and are looking to unload at a profit. With a few hastily cobbled together “special research reports” to make you really feel like you’re getting value for the dollars you’re being fleeced.

Of course, the mainstream “experts” at Port Phillip Publishing will strenuously deny it, and will point to their “we’re not allowed to invest alongside you” caveats as “proof”, but anyone with half a brain will be able to look past the propaganda and see Port Phillip Publishing for what it truly is, a money grabbing pump and dump shop.

I love your business model, I’ve just seen the truth and will let my current subscription expire when it runs out. No supposed “facts” from your good mainstream self will convince me otherwise.

Ouch! We would sue for libel, but as we printed it voluntarily, I guess we’d have to either sue ourselves or forget about it. We’ll choose the latter.

We’ve had that accusation levelled at us before. That we buy stocks first, then tell mug punters to buy them, so we can sell out at a profit. Handsome riches all around.

To put Daniel straight, it’s not true. First, to do such a thing would be illegal. Second, to do such a thing would harm the trust that our paying subscribers have in us.

And seeing as selling subscriptions is the only source of revenue for this business, it’s important that our integrity is squeaky clean.

Our editors and staff are barred from buying any stock that’s recommended by any one of our publications. The exception is for stocks that are in the S&P/ASX 200. But even then, there are rules about when a staff member can buy a stock, when they can sell it, and any such transaction must adhere to a strict and minimum holding period.

Any staff member who fails to follow these contractual rules faces immediate dismissal.

Besides, the assumption is that a stock always goes up after we recommend it.

If you’re familiar with your editor’s stock-picking record in 2011 (it was awful) anyone tempted to have done such a thing would have found themselves severely out of pocket!

Anyway, it appears that Daniel knows where the ‘exit’ is. That’s fine. As I always say, our relationship with our readers is voluntary.

Yes, we send interminably long emails and videos. But never once have we ever forced anyone to give us their personal details, get their wallet out of their pocket, enter their card details into one of our order forms, and then click ‘subscribe’.

We don’t have that power. We can only try to convince you to subscribe to one of our services. If you choose to do so, it’s of your own free will. Only the government has the power of force…which for some reason, most Australians actually seem to favour. Odd.

But, it’s not all one-way traffic. Two of our best subscribers [wink] have written in with words of support. This from subscriber, Christine:

I love the stirring of the climate changers! It is another example of following the herd. The scientists agree because that is what they are getting paid to research.  God forbid that the data doesn’t actually fit, let’s just leave out a few of those inconvenient places. Humans are so arrogant. They think what they do is more important than what the sun does! But you can’t debate because it is SETTLED, which means I won’t listen to any other ideas or admit we were wrong.  People are doing the same thing with climate change as they do in the stock market — assume a trend will always continue, when most things are actually cyclic i.e. it goes down as well as up.

Suspicious observers and it’s related sites are great for learning about climate.  He does research and has a great app which currently has 84% success rate for predicting earthquakes.

A fellow sceptic,

Christine

PS much as I like your stirring, unlike David (I think it was) I don’t need a reply to make me feel validated — I don’t care that much.

And from subscriber, Anthony:

I’m glad you didn’t apologise for your mention of the Daily Mail article. While uncritically reprinting that passage containing the fraud allegations was not up to your usual standard, rest assured your angry critics are guilty of much worse. The theme common among the chastising responses you reprinted from disgruntled readers was “Daily Mail is a bad newspaper, shame on you for quoting it!” In other words, an ad hominem argument. Whether the Daily Mail is any worse than the other multitude of sad excuses for “news” that characterise the mainstream media is not for me to say, but I think it’s highly illustrative that most of these cocksure readers could not even begin to explain in their own words why the article was so wrong. Instead, they seemed happy to let other like-minded commentators do their thinking for them, linking to a bunch of blog posts that supposedly debunked the Daily Mail article and whistle-blower John Bates:

“Here’s a URL to a story that agrees with me. Case closed!”

As it turns out, the “fake” Daily Mail news wasn’t so fake after all. John Bates DID blow the whistle, but his bone of contention was not that his colleagues at NOAA manufactured fake data, but that they failed to follow the correct and longstanding protocols for verifying the veracity of the climate data sets. While the climate Cassandras try to brush this off as inconsequential, it’s absolutely not. Such scientific protocols and safeguards are implemented for a very important reason — to prevent the release and publication of incorrect and ultimately misleading data.

That journalist David Rose and/or his editors couldn’t refrain from “pushing the envelope” (a trait, as history has amply demonstrated, hardly confined to writers at the Daily Mail) is no slight on John Bates. Of course, you wouldn’t know it from the multitude of muck-raking pieces that try to smear Bates by association. Here’s a classic example:

http://www.dailykos.com/story/2017/2/5/1630229/-Retired-NOAA-scientist-feels-slighted-sets-world-afire-in-revenge

Note how Ms Gardiner makes the highly unprofessional and unfounded smear that Bates is a “slighted”, revenge-seeking zealot. She then spends the rest of the article linking to other people who agree with her and attacking David Rose. Muck-raking character assassination at its best (worst).

Trouble for Gardiner and her like-minded ilk is that this issue doesn’t look like going away any time soon. It was serious enough for the US House Committee to re-start their investigation of NOAA’s antics. It stalled in 2015 after the Obama administration refused to hand over scientist’s emails regarding the illustrious “Karl study” — funnily enough, I don’t see the climate change alarmists attacking Obama et al for their lack of transparency. I mean, if they had nothing to hide, what’s the big deal with handing over a few emails? After all, Obama and his minions clearly had little issue spying on our emails (and phones). Hey, what’s good for the goose…

For those who think throwing a URL at someone constitutes an argument-ending knockout, you might suggest reading https://judithcurry.com/2017/02/06/response-to-critiques-climate-scientists-versus-climate-data/, which discusses the supposed debunkings of the Daily Mail article and a recent Bates post, along with rebuttals straight from the horse’s mouth: John Bates.

I’m guessing nothing will convince unwavering believers of the “man-made climate change” thesis. Eleven years have passed since climate huckster Al Gore premiered his fantasy blockbuster An Inconvenient Truth, and none of the film’s absurd predictions of imminent doom have come to pass. There have been no catastrophic sea level rises, polar ice caps are not melting and flooding New York, and the polar bears are doing just fine. But once again, I don’t see any of these “anthropogenic” climate alarmists-turned-sticklers for accuracy denouncing Gore. Instead of being laughed out of town, Gore — who has become a very, very wealthy man as a result of his climate extremism — is about to release an eagerly-awaited sequel.

Some people just never learn…

Keep fighting the good fight,

All the best.

On the question of polar bears, according to Polar Bears Science blog, the population appears to be at its highest level in years…perhaps even since records began:



chart image

Source: Polarbearscience.com
Click to enlarge


As for the term ‘fake news’, it appears to be the new get-clause for the liberal, doe-eyed mainstream media, and thin-skinned progressives, who just use it to label anything with which they disagree.

We can hear them now.

We say, the Earth is round. They say, ‘fake news’.

We say, the markets are in danger of a terrible collapse. They say, ‘fake news’.

We say, the welfare state is crumbling. They say, ‘fake news’.

We say, you can’t print money to create prosperity. They say, ‘fake news’.

And on it goes.

Ah well, we know which side of the fight we’re happy to be on. One day, the progressives may realise that too.

Cheers,
Kris