Higher, higher, higher!

Tuesday, 8 August 2017
Melbourne, Australia
By Bernd Struben

  • Have you taken the virtual leap?
  • Buy these two ‘old media’ stocks now
  • The suggestion box is open

Higher, higher, higher!’

Thus commanded my three-year-old daughter.

She could have been talking about the Dow Jones index and Bitcoin. Or iron ore, Aussie media companies and property. And she would have been right.

Property prices in four of the five major cities (Perth was the exception) rose again over the past week. And iron ore prices hit a four-month high yesterday, trading at US$76.17 per tonne. The rise, as you’d expect, can largely be attributed to China. The AFR notes,

China officials said they would cap steel output from November to March… That drove steel futures sharply higher on bets that demand for steel will spike in a rush to buy while supply remains abundant.

The iron ore rally has sent futures in Singapore back into positive territory, as you can see in the chart below.



chart image

Source: Bloomberg
Click to enlarge

I have my doubts about the sustainability of the iron ore rally. But that’s a story for another day. (One that rhymes with Ronald Thump.)

In the meantime, if you’re looking for what could be the best resource plays on the ASX, you should check out resource analyst Jason Stevenson’s latest tips here.

But it’s not just iron ore and commodities heading higher. Over in the US, the Dow Jones Industrial Average continues its seemingly inexorable rise as well. The Dow closed at 22,118.42 points on Monday. That makes nine consecutive trading days of new record highs.

Australian media companies and bitcoin are also on a tear, with bitcoin gaining 19% overnight. And speaking of bitcoin, you’ll notice that it’s earned a place in the markets section. Right alongside gold and silver.

We’ll get back to both of those shortly.

But in case you were wondering, my daughter’s command of ‘higher’ wasn’t related to global markets or cryptocurrencies. She hasn’t quite gotten her head around those yet.

She was secured on the rope swing in our backyard at the time. A swing that can send her soaring more than three metres off the ground. Of course, no matter how high I push her, she eventually comes plummeting back down…

Markets

Overnight, the Dow Jones Industrial Average gained 25.61 points, or 0.12% to close for another record high.

The S&P 500 gained 4.08 points, or 0.16%.

In Europe, the Euro Stoxx 50 index closed down 1.61 points, or 0.05%. Meanwhile, the FTSE 100 gained 0.27%, and Germany’s DAX index fell 0.33%.

In Asian markets, Japan’s Nikkei 225 index is down 64.41 points, or 0.32%. China’s CSI 300 is down 0.15%.

In Australia, the S&P/ASX 200 is down 32.90 points, or 0.57%.

On the commodities markets, West Texas Intermediate crude oil is US$49.21 per barrel. Brent crude is US$52.15 per barrel.

Gold is trading for US$1,260.13 (AU$1,591.87) per troy ounce. Silver is US$16.27 (AU$20.55) per troy ounce.

One bitcoin is worth US$3,468.22.

The Aussie dollar is worth 79.16 US cents.

Have you taken the virtual leap?

OK, I’ll confess. I have yet to make my first investment in bitcoin. Or any of the other 900 cryptos now in existence.

When I signed on with Port Phillip Publishing in November 2013, I had, of course, heard of this mysterious virtual currency. But I knew very little about it. And you should never invest in something you don’t understand.

That changed once I was introduced to tech guru Sam Volkering. He was on top of the crypto story from the get-go.

But any thoughts I had of investing were dashed by bitcoin’s rocketing performance. It soared from US$97.89 on 12 August 2013 to US$979.26 by 26 November. A gain of 900% in just over three months. That scared me off. And it turned out my fear was well founded.

Bitcoin slowly lost value, trailing all the way down to US$222.16 on 12 August 2016. And it wouldn’t crack US$1,000 until February this year. From there, as you know, it’s been on a tear once more.

At time of writing, one bitcoin is fetching US$3,468.22. That’s a gain of 248% this calendar year. Since we can’t turn the clock back to August last year and get in for US$222, you then have to ask, is this new rally sustainable?

Sam Volkering assures me it is. Though he does compare investing in any crypto to travelling through the ‘Wild West’.

Bitcoin may be the most widely adopted of the virtual currencies, but it’s still prone to some wild swings. While Sam is confident it will hit US$10,000 or more, it won’t be a smooth ride to the top.

Volatile or not, it appears the Australian government is finally beginning to catch on.

This headline comes from today’s The Age, ‘Bipartisan push for the Reserve Bank to back Australian bitcoin’. The article continues:

Labor and Coalition senators have crossed the political divide to call on the Reserve Bank to embrace bitcoins as an official form of currency or risk the future competitiveness of Australia’s $145 billion a year financial services industry.

The push from Labor senator Sam Dastyari and Liberal senator Jane Hume comes after the digital currency soared to an all time high of $4070 [Australian] per bitcoin on Monday, up from less than 10¢ per coin in 2010.’

You can’t get much more mainstream than the Australian government. If the Labor and Coalition senators can see the light of day, bitcoin’s spectacular rise since March this year looks like it’s only the beginning.

And to give you an idea of just how fast bitcoin can rise, it’s currently trading for AU$4,390. That’s up from the AU$4,070 quoted by The Age in the above article, released only this morning.

So, have you taken the leap into bitcoin yet? How about Ethereum? Or any of the other 900 cryptos currently on the market?

And it’s really those newer, mostly unknown coins that I find the most intriguing. The ones trading at 10 cents or less today that might be rivalling bitcoin in a few years. Those are the types of coins that could see a $1,000 investment turn into an Italian sports car…or leave you with empty pockets.

That’s an important point.

Unless you’re a crypto expert yourself, or have hours per day to study the virtual markets, any investment into these newly-emerging cryptos is akin to gambling. Now, I’ve got nothing against a little wagering. But I much prefer to have the odds stacked in my favour.

If you’re looking to improve your own odds before your next crypto investment, look no further.

Buy these two ‘old media’ stocks now

Back on 28 June, colleague Greg Canavan was well ahead of the curve on his latest investment recommendations. He wrote the following to subscribers of Crisis & Opportunity: ‘Buy these two ‘old media’ stocks now before a change in media ownership laws.

In the report that followed, Greg detailed two media stocks he was confident would benefit if the government amended media regulations. And, as he suspected, this looks to be playing out.

‘Media companies soar ahead of vote’, reads a headline in today’s Business Day.

Shares in media companies seen as potential merger targets have rallied to year highs just days before the Senate considers lifting Australia’s 30-year-old ownership restrictions.

Changing the rules would open the door to mergers and acquisitions as media companies try to increase their reach, in a bid to win back advertising dollars from online search engines and social media.’

Hmm. Where did I hear this before?

Oh, right. Back on 28 June in Crisis & Opportunity.

One of the ‘old media’ stocks Greg tipped is up a modest 1.8% since then. The other is up 25%. With the rule changes to media ownership laws not yet locked in, Greg maintains an active buy recommendation on both stocks.

You can find more of Greg’s investment insights here.

The suggestion box is open

You may have noticed a bit less Kris Sayce in your Port Phillip Insider recently and a bit more Bernd Struben. Moving forward, you’ll generally hear from me Monday through Thursday, with Kris batting cleanup on Fridays.

With that in mind, I’d love to hear from you. What stories and investment angles did Kris regularly follow that you’d like me to keep an eye on? (Don’t worry short-sellers, I’m watching Tesla.) What else would you like to see more (or less) of here at Port Phillip Insider?

Send your questions, comments, and general missives to letters@portphillipinsider.com.au. I’ll do my best to accommodate.

Cheers,
Bernd