Is there any other kind?

  • Melt up
  • A bold claim
  • How long do you want?
  • Bank trouble
  • The green backdoor

How do you know when a Tesla Inc [NASDAQ:TSLA] earnings announcement is due?

Just look out for a crazy ‘blue-sky’ announcement from Tesla’s one-man PR machine, Chairman Elon Musk.

The latest is a nationwide tunnel network in the US, which would allow cars to travel swiftly across and between cities. The name of this new venture?

It’s…The Boring Company. Get it? Boring…digging…tunnels! What a wonderfully amusing play on words.

As Musk explained recently at the almost always pretentious and look-at-me-aren’t-I-clever TEDTalk series:

We’re trying to dig a hole under LA, and this is to create the beginning of, what will hopefully be a 3D network of tunnels to alleviate congestion.

Genius! Although, we have to say, is the insertion of ‘3D’ really necessary? To be honest, we’re not even sure that a 2D tunnel is physically possible.

Our whole life we’ve kind of taken it for granted that tunnels are three-dimensional. So we naturally wonder how Mr Musk’s tunnels will be any different from those that currently exist.

Now, if he had promised ‘4D’ tunnels, that would have been different.

But regardless, all we know is that an earnings announcement must be nigh. And sure enough, it is — on Thursday morning Australian time. With the latest diversionary tactic in place, investors can begin dreaming about the wonderful future for Tesla.

We’re still curious as to whether that future will ever involve Tesla making a profit. We tend to think not.

Markets

Overnight, the Dow Jones Industrial Average fell 27.05 points, or 0.13%.

The S&P 500 gained 4.13 points, or 0.17%.

In Europe, most markets were closed for the May Day holiday.

In Asian markets, Japan’s Nikkei 225 index is up 135.66 points, or 0.7%. China’s CSI 300 is down 0.39%.

In Australia, the S&P/ASX 200 is down 34.22 points, or 0.57%.

On the commodities markets, West Texas Intermediate crude oil is US$48.75 per barrel. Brent crude is US$51.48 per barrel.

Gold is trading for US$1,256.87 (AU$1,665.99) per troy ounce. Silver is US$16.93 (AU$22.43) per troy ounce.

The Aussie dollar is worth 75.43 US cents.

Melt up

We’ll see your 10,000, and raise you 10,000.

We have no idea if colleague, Sam Volkering, is a poker player, or a gambler in general.

We’ve never thought it worth asking.

But after checking out today’s Australian Financial Review, Sam’s latest research now appears to make sense.

According to the AFR:

Australia’s sharemarket could jump by as much as two thirds over the next decade, underpinned by a booming superannuation sector and the nation’s status as a “growth haven”, according to a new report by Macquarie Research.

The report, released ahead of Macquarie’s annual three-day investor conference in Sydney, which starts on Tuesday, says the ASX 200 could climb from its current level at just below 6000 points to 10,000 points over the next 10 years, and to 20,000 points by 2040.

Aha! Now that’s more like it — 20,000 points. That’s closer to what Sam has in mind.

Except, Sam’s timeframe is a little shorter. Forget 2040. That seems so far away. Sam’s pegged the Aussie market to hit that level way before then.

When exactly? Find out here. And the investments you could make to perhaps bag you a bigger return than if you just buy blue-chips.

Sam says that this is a ‘melt-up’ of Aussie stocks. The last and biggest major push of the current bull market.

As for the Macquarie Research report, and the AFR’s reporting of it, the AFR continues:

The Macquarie report suggests four sectors that should do well over the next few decades: educations, tourism, services, and agribusiness.

Mr Todd says the changing face of Australia’s workforce, and the increasing number of millennials, bodes well for these sectors’ growth.

“The millennials are much more aligned towards digital and services sectors,” he said. “It also fits into the structural shift that Australia is trying to make from natural resources.”

Make of that what you will.

We can’t deny that the AFR and Macquarie report feels a little superficial. Especially with its belief that superannuation and Australia’s ‘growth haven’ status alone will provide the gains.

We’d like to think there would be more to it than that. But you be the judge. And after all, it’s not just Macquarie that thinks big gains are ahead. Our own Sam Volkering figures investors can bag big gains too.

Make sure you check out Sam’s research here.

A bold claim

We confess. Before we turned all bearish, we figured the Aussie market was heading for big gains too.

You see where the Aussie market is now, just below 6,000 points. Our money was on the ASX getting there and beyond (to 7,000 points) by January 2015. It never happened.

But it didn’t matter. It didn’t stop us helping small-cap investors to clock up big dollar returns.

Sam figures the ASX is heading towards 20,000 points. There’s no telling if it will really get there. But even if it doesn’t, there are always opportunities in the small-cap sector, and when it comes to finding them, Sam is among the best there is.

How long do you want?

The term ‘kicking the can’ looks set to get a new, or at least, modified meaning.

From Bloomberg:

From the moment that Steven Mnuchin first hinted back in November that the Trump administration would entertain the idea of selling ultra-long bonds, the consensus across Wall Street was pretty clear: Don’t do it. There’d be no easy way to lure a steady stream of buyers, the skeptics said, and the initiative could prove costly to U.S. taxpayers.

We’ll take a pause there.

We don’t for a moment believe that anyone on Wall Street would try to talk a government out of issuing ultra-long dated bonds. We’re talking about 50-year or even up to 100-year bonds.

Granted, there could be one argument why Wall Street may not like those long-dated bonds. It may reduce or push out the issuance of new bonds, as bonds will mature at a later date.

That may have an effect on the profits made by Wall Street’s big banks.

But we doubt that would happen. In fact, we’d argue the maturity of bonds is irrelevant for Wall Street. Wall Street’s big money spinner comes from the trading in and out of bonds and other securities.

The bigger point is that if you needed any confirmation of it, it’s clear that no US government, not even one headed by a so-called ‘outsider’, has any interest in cutting American debt levels.

Again, no surprise. President Donald Trump, in his previous role as a real estate developer, was a regular frequenter of the debt markets. That is, apparently, how one builds real estate wealth.

And who will argue against it? If an ‘outsider’ is for it, you can bet your bottom borrowed dollar that the ‘insiders’ will be for it. As Bloomberg reports:

“It’s a reasonable probability that the Treasury will issue these bonds,” said Scott Mather, chief investment officer for core strategies at Pimco, which oversees $1.5 trillion. The argument is that the U.S. “won’t have to pay much to gain more certainty and the ability to lock-in low rates for a long time.”

A number of Democrats are on board as well. Last year, Mark Warner, the ranking Democratic member of the securities, insurance and investment subcommittee of the Senate Banking Committee, pushed then-Treasury counselor Antonio Weiss on why the U.S. wasn’t selling ultra-long bonds. He hasn’t changed his tune.

And why the blazes would he? Borrow it today. Spend it tomorrow. Repay it…who cares!

But all of this raised our curiosity. What other nations have taken the plunge with ultra-long bonds?

Our handy data-filled Bloomberg terminal provided an almost immediate response.

The Bolivian government has many bond issues due to mature in 2116, after issuing its latest line of 100-year bonds last November.

It pays a coupon of 4.3%, but doesn’t appear to have traded much. We can’t imagine why.

As luck would have it, the Kingdom of Belgium also has a 100-year bond, due to mature in 2116. It was issued with a coupon of 2.3%. That’s a steal, said the market. It now trades on a yield of 2.08%…up from last year’s low of 1.42%.

Who wouldn’t want to lock in a guaranteed annual yield of 1.42% for 100 years?

On the [cough] shorter end, the good folks in Austria’s government likewise thought it a good idea to make the most of low interest rates.

Have yourself an 80-year bond, maturing in 2086. The coupon is 1.5%. The current yield is 1.8%. Ah, those foolish investors. Don’t they know they’re missing a bargain?

The long and the short of it is this: the lengthening of bond maturities, and ongoing rising debts, confirms to us that the current money system is in severe trouble.

That shouldn’t be news to you. We’ve banged on about it almost every day for the past 12 years.

But as much as the markets have managed to boom since the meltdown in 2008 and 2009, we can’t help but feel that (perhaps obviously) the longer this boom lasts, the closer we’re getting to a meltdown that will be bigger than the last.

And this time it won’t just be the financial markets that suffer, it will be the entire monetary system.

History shows that paper-based money systems have relatively short lives. Australia’s current system has only been in existence since decimalisation in 1966.

The UK’s system is similarly ‘youthful’, since it decimalised in 1971.

The current US money system, while it appears to be the same on the surface, changed significantly in 1971, when President Richard M Nixon closed the window on gold convertibility.

And as for that basket case of Europe, the euro, not even out of adolescence since its founding in 1999, has been on the ropes — nearing collapse for more than half of its years of existence.

Paper money doesn’t last. It never has. And — you guessed it — it never will.

Bank trouble

Speaking of interest rates, the Reserve Bank of Australia today held its Cash Rate at 1.5%. Nothing more to report.

Elsewhere, a bad day for Australia & New Zealand Banking Group Ltd [ASX:ANZ].

From the Australian Financial Review:

ANZ has posted a $3.4 billion cash profit for the six months to March 31, below expectations of a $3.5 billion profit with a leading bank analyst describing the result as messy.

Late this afternoon, the stock was down 2.5%.

The other bank stocks were down in sympathy. National Australia Bank Ltd [ASX:NAB] and Westpac Banking Corporation Ltd [ASX:WBC] report their half-year results over the next week.

More trouble ahead?

The green backdoor

As well as predicting the ASX to go to 20,000 points, colleague Sam Volkering has also been scouring around for the best cannabis plays on the market.

Sam’s official report on what he calls ‘pot stocks’ has now been taken offline. But there’s still a backdoor way to get his research. (Hope he doesn’t read this!) You can get in on the story here. Just don’t tell him I told you.

While the pot/marijuana/cannabis story isn’t as new as it was four months ago, it’s still a hot story. As Bloomberg reports today:

Tribeca Investment Partners Pty, owner of the world’s best performing hedge fund last year, has found its next stock pick: a tiny grower of cannabis.

That tiny grower is about to list on the ASX.

We wouldn’t be surprised if the share price went bonkers when it lists. And the buzz behind that listing could have a knock-on effect to Sam’s current picks.

One of which is already up over 120%. And two (of his four recommendations) are trading below his maximum buy-up-to prices.

We don’t know if Sam will be right about the ASX hitting 20,000 points, but we’re convinced he’s right to back the growth in the cannabis sector.

Hedge fund Tribeca Investment Partners seems to agree.

Cheers,
Kris