We are bored…

  • Piling on debt
  • Just landed…
  • Bubble? What bubble?
  • From the mailbag

I’m going to be so presidential that you people will be so bored.

This was US President Donald Trump’s campaign promise, and it seems to be the only one he is sticking to.

After crusading for change, he seems to have abandoned all his promises, turning conservative.

Obamacare? Still there.

The promise of not meddling in international affairs….well, he couldn’t help authorising air raids on Syria last week. Even if, during the election campaign, he said that an attack on Syria ‘…could very well lead us to World War Three.

China is no longer a ‘currency manipulator.’ In fact, to paraphrase Trump, it is not China’s fault that the US dollar is strong; it is Trump’s fault because people have confidence in him…

US relations with China are turning sour.

During the election campaign, Trump had also mocked the Export-Import Bank of the United States — a government agency that gives loans to foreign entities so they can purchase American-made goods — saying that the agency was not necessary.

Change of plan. He is now preparing to revive it. That’s a big win for Boeing, which has customers using the bank’s services — and which incidentally had pledged US$1 million to Trump’s inauguration.

He has even changed his mind about NATO. ‘I said it was obsolete. It’s no longer obsolete,’ it is a ‘…bulwark of international peace and security.

What’s next, Yellen staying as head of the Federal Reserve?

Ahem.

After saying last year that Yellen should be ‘…ashamed of what she was doing to the US,’ he is now open to her staying…the fact is, Trump has realised he likes a low-interest rate policy. It doesn’t really surprise us; after all, Trump is a property developer.

The truth is, the dollar has slumped since Trump said it was too strong. And if Trump wants lower interest rates and a cheaper dollar…it is great news for emerging markets.

His approval rating has jumped to 50%, up from 37% almost a month ago.

The markets don’t know what to think. They are not so sure the US$1 trillion spending spree is actually going to happen.

Trump is right; we may get bored if he turns conservative. All there is left untouched from his presidential campaign are the NAFTA renegotiations and the ‘big beautiful wall’.

But even those seem unlikely to happen.

In fact, he is already planning to step up collaboration with Canada and Mexico.

You see, the three countries have announced a joint bid to co-host the 2026 FIFA World Cup, and Trump has given his support. In true Trump fashion, the 2026 World Cup promises to be ‘the most successful World Cup in the history of FIFA’ — that is, in economic terms.

What they mean is that, unlike Brazil, which spent a whopping US$15 billion to host the last World Cup — and got a miserable US$100 million in return — the trio of North American nations will not be spending money on infrastructure.

Instead, they will be using the existing infrastructure in place already.

Who would have thought Trump would turn down the chance to improve the nation’s infrastructure? Not us.

More on the US economy below. But first, a look at the markets.

Markets

Overnight, the Dow Jones Industrial Average was up 183.67 points, or 0.90%.

The S&P 500 was up 20.06 points, for a 0.86% gain.

In Europe, the Euro Stoxx 50 dropped 20.25 points, or 0.58%. Meanwhile, the FTSE 100 fell 0.29%, and Germany’s DAX index lost 0.38%.

In Asian markets, Japan’s Nikkei 225 is up 49.46 points, or 0.27%. China’s CSI 300 is up 0.14%.

In Australia, the S&P/ASX 200 is down 53.20 points, or 0.90%.

On the commodities markets, West Texas Intermediate crude oil is US$52.64 per barrel. Brent crude is US$55.38 per barrel.

Gold is trading for US$1,283.82 (AU$1,698.53) per troy ounce. Silver is US$18.39 (AU$24.33) per troy ounce.

The Aussie dollar is worth 75.60 US cents.

Piling on debt…

Unemployment in the US has fallen to 4.5%, the lowest since 2008. Yet job creation has been slow; only 98,000 jobs were created during March, well below the figure in January and February.

Meanwhile, credit card debt has reached US$1 trillion, the highest level since the global financial crisis. As the argument goes, more spending equals a stronger economy.

Credit card debt is not the only thing breaking records. According to Bloomberg, automobile debt has reached US$1.16 trillion, 9.2% of total household debt.

Yet the big worry is that student loans are becoming a large contributor to household debt. According to USA Today, outstanding student loan balances increased by US$31 billion since the last quarter. Growing expenses and cuts in funding could make student debt the new time bomb. And it keeps increasing…

According to MarketWatch, student debt loan grows by US$2,726 every second.

More importantly, students are falling behind on repayments. According to USA Today, 1.2% of all student loan debt was 90 or more days delinquent or in default in the fourth quarter of 2016. This rate surpasses that of credit card loans (around 7% delinquent) and auto loans (around 4%).

Just landed…

Publisher, Kris Sayce, has just returned from his family holiday to the US and Canada.

Just off the plane, he sent me this note:

Hey Selva,

Just a quick reminder. The special microcap investment summit begins this Friday.

I spent a bucket load of money flying expert Sam Volkering back to Melbourne to co-host this special summit with me.

I believe this will be the most important investment event of the year — both in terms of basic investment education, and for folks to gain an understanding of the truly remarkable returns on offer.

It’s sure to be a cracking event. It’s a ground-breaker too. We’ve never done anything like this before.

What’s more, I want us to hammer something else home to our readers. The past few days, I’ve specifically talked about the terrific gains available from “tiny stocks”. Well, check this out.

Bear in mind, as I’m writing you this note, the blue-chip S&P/ASX 200 index is down 1.2%.



chart image

Source: CMC Markets Stockbroking
Click to enlarge


Look. One of those stocks is up a whopping 116%.

Another is up 100%.

A third is up 66%.

Another seven stocks are up between 25% and 36%.

Again, on a day when the big blue-chip sector of the market is down 1.2%.

To be sure. I’m not saying all “tiny stocks” have done this well today. All I’m saying is that, even on down days, it’s possible to get giant gains from “tiny stocks”.

Compare that to the biggest gain among the top 200 stocks. Right now, Dulux Group Ltd is up…2.67%.

My point? If you’re looking for big gains, but you don’t want to put a large amount of your capital at risk, “tiny stocks” could be the way to go.

If any of our readers are thinking along these lines, they should check out the special summit co-hosted with Sam Volkering. Its available starting this Friday. Tell them to click on this link to register.

Registrations are required due to the speculative nature of the information Sam and I discuss. This strategy is definitely not for the timid investor. Please pass this info on to Port Phillip Insider readers.

I’ll be back in the office tomorrow.

See you then.

Cheers,

Kris.

What more can I say. As Kris says, if you like speculation, and you want to see how it’s possible to make big gains, even in a down market, go here now.

Bubble? What bubble?

Last week, Australia got a sneak peek at the 2016 Census results. Remember that? The one that allegedly got hacked?

The Australian Bureau of Statistics (ABS) is still going through the results, but it has confirmed that 96% of households responded to the Census, with the full data to be released in June.

According to the ABS, the ‘typical’ Australian is a 38-year-old female born in Australia and of English descent. She is married and lives with a family of two children in a three-bedroom house.

Nationally, the typical Australian is paying a mortgage on that three bedroom house. But how do the results vary across Australia?

Here is where the results get interesting.

The ‘typical’ Australian home in Victoria, South Australia, Western Australia and the Australian Capital Territory has a mortgage.

In Queensland, the typical home is just as likely rented as owned with a mortgage, while in the Northern Territory the ‘typical’ home is rented.

In Tasmania, the typical Australian home is owned outright.

And in New South Wales, the place containing the area with the highest house prices in the country (and increasing debt), the typical Australian home is also owned outright. Yep, that’s right, no mortgage and no rentals. The average 38-year-old NSW resident — with median prices above $1.1 million — has the house all paid up.

A bit odd, if you ask us. Maybe, instead of stealing the information, the alleged hackers fiddled with it, just for a laugh…

Does this mean there is no bubble? Maybe.

It also doesn’t mean there isn’t one.  

Meanwhile, Australian housing prices are ‘dangerously dumb’.

Not our words, but those of Deloitte. Australia has the world’s second largest household debt and, according to Deloitte, property prices are more overvalued than at any time since at least the early 1980s.

The RBA is also sounding the alarm bells.

From Bloomberg:

The Reserve Bank of Australia, in its semiannual Financial Stability Review Thursday, said interest-only loans are rising and now account for almost a quarter of owner-occupier mortgages. It also noted about one-third of mortgage holders have either no buffer or less than one month’s repayments.

The government is now looking at different ways to solve the housing affordability crisis. One of them is to limit the number of properties an investor can buy — anything to avoid touching negative gearing.

According to The Age, the number of investors with two or more rental properties has grown by 6.2% between 2012–13 and 2014–15. Probably due to easy facilities like interest-only loans.

The truth is that an increase in rates — or elimination of negative gearing — would cause problems.

So let’s keep feeding the bubble.

Regards,
Selva Freigedo