More than a ‘little cautious’

  • White elephant
  • Not over yet
  • Podcast
  • 2-minute challenge
  • In the mailbag

This’ll make you laugh. From the Sydney Morning Herald:

Confidence in the housing market has collapsed, with the number of Australians describing property as the wisest place to put their savings falling to its lowest level in more than 40 years.

The Melbourne Institute of Applied Economic and Social Research has been asking about the wisest place to store savings since it began its consumer confidence survey in 1974.

Oh, OK, well not that bit, this bit:

Westpac chief economist Bill Evans said the result showed “a clear increase in risk aversion”.

“Consumers are saying: yes we expect [real estate] prices to rise, but we are a little cautious.”

Huh!

Where does it say that consumers expect house prices to rise, but that they are cautious?

We thought it said that only 11.6% of consumers thought property was a safe place for savings. That, by the way, is down from 28% in September 2015.

In other words, as recently as just over two years ago, nearly one-third of consumers thought housing was a safe bet. Today, barely one-in-nine have the same view.

We should think that Mr Evans and Westpac may want to take these development a little more seriously. The Aussie house price crash is coming…and soon!

Markets

Overnight, the Dow Jones Industrial Average fell 15.55 points, or 0.07%.

The S&P 500 fell 3.88 points, for a 0.16% drop.

In Europe, the Euro Stoxx 50 gained 30.64 points, or 0.9%. Meanwhile, the FTSE 100 climbed 0.64%, and Germany’s DAX index added 0.61%.

In Asian markets, Japan’s Nikkei 225 is down 60.62 points, or 0.31%. China’s CSI 300 is down 0.21%.

In Australia, the S&P/ASX 200 is up 18.11 points, or 0.31%.

On the commodities markets, West Texas Intermediate crude oil is US$48.90 per barrel. Brent crude is US$51.83 per barrel.

Gold is trading for US$1,225.85 (AU$1,597.73) per troy ounce. Silver is US$17.28 (AU$22.52) per troy ounce.

The Aussie dollar is worth 76.72 US cents.

White elephant

Dopes.

From Bloomberg:

Proposal from former BHP Billiton and BP executives for a 350 megawatt gas-fired power plant which could import LNG from North West Shelf or Singapore, the Australian Financial Review reports.

If we’ve got this right, two years ago, South Australia closed two of its coal-fired power stations. This was all in an effort to go ‘green’.

Now that the idea has proven to be a complete failure, due to the unpredictability of most alternative energy supplies, the South Australian government is going back to fossil fuels again.

Naturally, we don’t have a problem with that. The more fossil fuel the better.

But it just shows you the ridiculous lengths that the environmental terrorists will go to in order to push their suspect and ill-thought-out ‘green’ agenda.

There’s more. Managing editor, Bernd Struben dropped us a line this morning. He noted:

Talk about government always being three steps behind the curve. The new Snowy Hydro plan (not necessarily a bad idea) is intended to supply enough power for “up to” 500,000 homes. And it will take five years to build.

In that time Australia is estimated to add around 1.8 million people. It’s like building a new two lane road to relieve congestion based on last year’s usage figures. Add another 100,000 cars and you’re back to where you began, or worse.

Bernd is spot on. This whole energy hullaballoo is something our colleague, Greg Canavan, has been all over with his ‘Crunch Point’ idea. You can find the details here.

In short, it’s the idea that due to lower than expected natural gas production out of Queensland, and terrible decisions by the New South Wales and Victoria governments to ban onshore drilling, local energy companies have to import natural gas to keep up with demand.

In the case of South Australia, it seems even that isn’t working. Hence the blackouts.

As for the Snowy Hydro scheme, we wrote about that back in 2011. We said the fabled scheme was nothing more than a giant government ‘white elephant project’.

Six years on, we’re happy to stick with that view.

At the time we quoted from a 2008 report on the Snowy Hydro project. It noted:

When the Snowy Mountains Hydro-electric Scheme was first conceived, the planned power generation was 1,720 megawatts, equivalent to Australia’s total capacity.

Other forms of electricity generation have since surpassed hydropower, and the contribution of hydro-electricity to the national energy grid dropped to 7 per cent in 1974–75 [the year the Snowy Scheme was completed], and to 1 per cent in 2005-2006.’

A report in today’s The Age, says that the Snowy scheme contributes to about one-third of Australia’s renewable energy electricity capacity.

Seeing as renewable energy comprises less than 15% of Australia’s energy generation, even if we’re being kind, the Snowy scheme’s contribution is on a very small scale.

You’re often told that only governments can plan for the future. Only governments can deal with such grand schemes and plans.

Turns out, they can’t. Instead, they make rash and idiotic decisions, that later come back to bite them (and the people) on their proverbial backside.

Not over yet

From Bloomberg:

Complacency among equity investors is rising after Dutch voters inflicted a blow to political populism and JPMorgan Chase & Co. says it’s a good time to hedge against a slide in stocks.

We don’t know Geert Wilders from a bar of soap.

But we’ve seen this idea in a few places that populists are suddenly out of favour.

We wouldn’t be so sure about that.

The Dutch prime minister’s party received 21.3% of the vote, down from 26.6% last time. His party also lost eight seats.

Mr Wilders’ party won 13.1% of the vote, up from 10.1% last time. His party also managed to grab an extra five seats, taking their tally to 20 seats.

Meanwhile, the Labour Party’s vote fell 19.1 percentage points to 5.7%, and it lost a whopping 29 seats, to keep just nine.

We saw the same message in a recent UK by-election. The UK Independence Party failed to win a Westminster seat in what was the country’s most pro-Brexit constituency.

However, what the experts seem to forget is that there’s a big difference between voting for a single issue, and voting for a political party that covers many issues.

We could be wrong, but our bet is that predictions of the death of populism are somewhat premature.

Podcast

Remember to check out the latest Financial Anarchists podcast. Go to iTunes and Stitcher. If our ratings don’t improve, we could be out of a job!

2-minute challenge

Have you joined the ‘2-minute challenge’ yet?

Get onto it.

You shouldn’t miss it. We’re going to show Aussies how it’s possible to scalp multi-hundreds of dollars from the markets, without buying or selling a single share of stock.

It sounds crazy to most folks, but it’s not. It happens on the Aussie market every day. Yet, we doubt that more than one in 500 Aussie investors know anything about it.

For instance, today, savvy investors ‘scalped’ sums like these:

  • $75 from Australia & New Zealand Banking Group Ltd [ASX:ANZ] shares
  • $1,215 from the same stock
  • $500 from Telstra Corporation Ltd [ASX:TLS] shares
  • $195 from BHP Billiton Ltd [ASX:BHP] shares
  • Another $195 from the same stock
  • $1,860 from Macquarie Group Ltd [ASX:MQG] shares

These numbers aren’t abnormalities. You see them show up every day. Now, that’s not to say you can just dip your hand into the market and grab these amounts.

This isn’t a ‘lucky dip’ at the fair!

The point is, these cash payout opportunities exist. And certain smart traders are getting their dirty mitts on them every day.

It’s money you could have a chance of grabbing too. If you know how to do it. If you follow specific steps. And if you stick to a strict and rigid set of rules.

It’s not for everyone. But I believe at the very least, every educated and sensible Aussie investor owes it to themselves to understand how it works.

If you take the ‘2-minute challenge’, you’ll do just that. For details, go here.

In the mailbag

Another subscriber writes about one of our ‘hot picks’. This from Peter:

I understand due to volume you cannot personally respond to all complaints.

I also understand the risks of stock investing.

One issue however is serious. I received an email advising 3 gigastocks could potentially return 1000s % and as other readers pointed out the buy up price was already exceeded, so based on your reports on potential returns I bought into BAR, prices tanked almost overnight then Jason issued an alert Sell sell sell days after buy buy buy.

I’m sure PPP is aware of the ramifications of that, when consumers are losing substantially on your advice.

As I mentioned previously my portfolio looks like a bomb hit it, all PPP recommendations. The BAR is particularly an issue as I was advised to buy then sell within days, within weeks that stock sits at -45%.

Peter refers to a stock mentioned in a recent promotion for Resource Speculator.

We’re glad he raises this issue. Jason Stevenson recommended this stock a while back at 4.4 cents per share. It’s a tiddler.

The company is involved in the exploration of various materials, including those involved in the hot, lithium battery industry.

When we released the research report, the stock price was above the current maximum buy-up-to price. But because it’s an interesting story, and because we don’t (and can’t) know which way a stock will move next, we still published the research.

Eventually the share price retraced below Jason’s buy-up-to price, allowing readers to enter the stock and Jason to record it as an official recommendation.

However, as with all our recommendations, we issue strict buy-up-to price limits. That means, regardless of what’s happening with the stock or the broader market, if the price is above a certain level, we advise investors not to buy it.

In most cases we print the instructions in bold, and in upper case: DO NOT. We then usually repeat it three of four times — sometimes more — in order to get the point across.

Now, perhaps partly as a result of our research report, but also due to the increased interest globally in battery-related stocks, the company in question, along with many others, soared in price in a short period of time.

As Jason later told his subscribers, he found at least three other stocks that had gained similar amounts over the same time. Their price rise couldn’t possibly have had anything to do with our research report.

Anyway, the price rise created a conundrum for Jason. Should he stick with the stock, or should he issue a sell recommendation and take the profit?

Jason’s subscribers will be pleased to know that he didn’t take the decision lightly. We discussed it for a good hour in my office. He gave me his reasons. I gave him my feedback. And we agreed that issuing a sell alert made sense.

I 100% supported Jason’s decision, once he had laid out his reasoning.

The issue then is whether investors who bought at a higher price could be negatively impacted by that decision. My advice to Jason was that investors who pay more than the buy-up-to price have done so for themselves.

His advice was to pay no more than 4.4 cents. Jason can’t be responsible for folks who pay above that amount. In fact, investors who took Jason’s advice to buy at or below 4.4 cents are still in the money if they ignored Jason’s advice to sell.

As I write, the stock trades at 7.9 cents.

I mentioned this yesterday. We give advice. I believe we mostly give good, and the right advice. Sometimes we may give bad, wrong advice.

(Long time readers will know all about my recommendation to buy Quickflix shares several years ago at 12 cents. We issued a sell recommendation about two years later for around one cent. Ouch!)

But whatever advice we give is just advice. We don’t manage money, and neither do we have the desire to manage money. We know that most of our competitors in the newsletter business diversify into funds management. That’s not our game. We publish ideas, and let the investor make the final decision.

That’s the beauty of being an independent investor.

Anyway, in the interests of disclosure, I’ll also let you know that when Jason and I discussed the sell recommendation, I told him he’d get hate mail for it.

He did. Most of it we can’t print here.

But Jason issued the sell recommendation knowing this, because he believed it was the right thing to do.

From my perspective, as the publisher for this business, that’s good enough for me. Everything we do is based on what we believe is the right thing for our subscribers. Sometimes we’re right, and sometimes we’re wrong.

But we always give advice with your best interests in mind. I don’t expect everyone to understand that, but that’s just how it is.

Cheers,
Kris