Have you built your financial storm shelter?
Thursday, 20 December 2018
By Bernd Struben
- Is Australia next?
- Five more days…
Well I got that wrong.
Here’s an edited excerpt of what I wrote to you yesterday:
‘A rate rise already looks largely priced into the markets. If the Fed does raise rates again, I wouldn’t expect any drastic selling.
‘On the other hand, if the Fed keeps rates on hold, markets could see a few days of tidy gains before the holidays.
‘Trump, for one, is maintaining the pressure for Powell to do just that…
‘Powell may choose to give his boss the proverbial finger and press ahead with the rate rise.
‘But… I think he’ll give way under this pressure. And just in time for Christmas.’
As you probably know by now, US Federal Reserve Chair Jerome Powell did not give way under pressure from Trump and other business leaders.
At 2pm EST the Fed announced that it was going ahead with another 0.25% interest rate increase. This puts the US benchmark rate in the 2.25–2.50% range.
While a rate rise was widely expected (if not by your editor), the market did sell off. Which makes me wrong twice…
The graph below shows the Dow Jones’ performance yesterday. You can see what happened at 2pm, the time of the Fed’s announcement.
Source: Google Finance
Click to enlarge
At 2pm the Dow was up 1.17%. By the time the index closed it was down 1.49%, shedding 652 points in rapid order.
Clearly some traders were betting on the Fed keeping rates on hold. But the selloff was likely driven by the Reserve Bank’s continued confidence in the US economy. And its plans for further rate rises.
Now the Fed did modestly scale back the frequency of its projected rate rises. As the AFR reports:
‘Fresh economic projections released by the Fed showed policymakers expect two rate hikes next year and one the following year, with the median forecast for the federal funds rate at 3.1 per cent at the end of 2020 and 2021. The September projections pointed to three potential rate hikes next year and one in 2020.
‘Policymakers’ also lowered their view of a neutral rate to 2.8 per cent.’
If the charts are anything to go by — they are — investors weren’t cheered by the fairly hawkish outlook.
All three major US indices lost ground. The Nasdaq led the charge, losing 2.17% in a selloff that also commenced at 2pm on the nose.
At time of writing, all the major Asian and Aussie indices are in the red as well.
Not the best results for the last full trading week of 2018. And it may put a crimp in those last-minute Christmas shopping sprees.
Unless, of course, you’ve been following our wealth preservation expert Vern Gowdie’s advice.
Vern believes the losses we’ve seen over the past six weeks are just the tip of a very nasty iceberg. In fact, his extensive research indicates we could be looking at market losses of 65%…or more.
He explains everything in his must-read survival guide. If you haven’t already, you can find out more, and download your copy, here.
Now let’s have a look at those markets…
Overnight, the Dow Jones Industrial Average closed down 351.98 points, or 1.49%.
The S&P 500 lost 39.20 points, or 1.54%.
In Europe, the Euro Stoxx 50 index finished up 11.25 points, or 0.37%. Meanwhile, the FTSE 100 gained 0.96%, and Germany’s DAX closed up 25.32 points, or 0.24%.
In Asian markets, Japan’s Nikkei 225 is down 504.92 points, or 2.41%. China’s CSI 300 is down 0.96%.
In Australia, the S&P/ASX 200 is down 40.79 points, or 0.73%.
On the commodities markets, West Texas Intermediate crude oil is US$47.20 per barrel. Brent crude is US$57.24 per barrel.
Turning to gold, the yellow metal is trading for US$1,243.85 (AU$1,750.42) per troy ounce. Silver is US$14.60 (AU$20.55) per troy ounce.
One bitcoin is worth US$3,686.63.
The Aussie dollar is worth 71.06 US cents.
Is Australia next?
In yesterday’s Port Phillip Insider, I wrote to you about the US$62.9 billion green tsunami.
That’s how much Zion Market Research forecasts the legal global cannabis market will be worth by 2024.
We looked at how Thailand is set to become the first nation in Southeast Asia to legalise medicinal marijuana. And how New Zealanders will vote on legalising its recreational use in a 2020 referendum.
If the Kiwis vote in favour of full legalisation, pot-stock guru Sam Volkering says the market could be worth AU$1.18 billion by 2028. Not bad for a country with only 4.8 million people.
And that green tsunami shows no signs of slowing down. Even Australia is getting caught up in the wave.
From The Age:
‘Re-elected [Reason Party] MP Fiona Patten has put drug law reform at the top of her political agenda by introducing a bill to legalise marijuana in Victoria…
‘The change would contribute $204.6 million to Victorian coffers over four years, Ms Patten argued…
‘Ms Patten’s new focus on legalising cannabis comes after Victoria became the first state in Australia to legalise access to medical marijuana to treat seriously ill children…
‘The Greens will also move to change Victorian laws, calling on the government to support a national scheme to legalise recreational cannabis for adult use.’
Now the Greens and the Reason Party won’t be able to get this through Victoria’s parliament on their own. Though I suspect they’ll be joined by the newly elected Liberal Democrats, who strongly support individual rights.
Whether they’ll be able to convince enough members of the major parties to vote for legalising recreational cannabis remains to be seen. But even if they fail the first time around, the tide is clearly changing.
Australia’s pollies may not be bold enough today. But I suspect that soon Australia and many other nations around the globe will see the light on legal marijuana.
In the meantime, Canada continues to charge ahead.
As you can see in the image below, you can even smoke pot on the grounds of Vancouver airport. Perhaps just the thing to calm your nerves before a long flight.
Source: Will Willitts, AFR
Click to enlarge
As the global push to legalise recreational use of cannabis gains steam, it’s important to remember the remarkable — and lucrative — medicinal market for cannabis that started it all off. And that market continues to grow.
From the AFR:
‘Canadian cannabis company Tilray has signed a global partnership with a division of Swiss drug giant Novartis to develop and distribute its medical marijuana in legal jurisdictions around the world.
‘Tilray said it’s reached an agreement with Sandoz to boost medical cannabis products globally…
‘Tilray jumped 12 per cent in New York to $US73.70. Novartis fell 1.3 per cent in Switzerland.’
It’s really something to watch a brand-new industry take shape in front of your eyes.
As an investor, you need to ask yourself if you’re content to watch it all unfold from the sidelines, or if you want in on the action.
If your answer is ‘I want in on the action’, do yourself a favour and check out Sam Volkering’s new report, ‘The Black Book of Cannabis’.
In it, Sam explains why the fortune cascading from cannabis has just begun…and how you can grab your share.
Five more days…
‘How many more days until Christmas is it now?’
This is the voice of my new alarm clock. Also known as my five-year-old daughter.
She started asking last week. And has reliably kept at it since.
Unlike my old alarm clock, she doesn’t come with a snooze button. And she tends to waltz into our room before I’m ready to get up.
It’s OK though. I like her enthusiasm. And I’ll get even when she’s a teenager and looking to have her weekend sleep-ins.
This morning I was surprised that my answer was five. Only five more days until Christmas.
That means you won’t hear from me again until the new year…on Wednesday, 2 January.
Tomorrow you’ll still hear from Sam as normal.
Over the holiday week we’ll send you some special editions of Selva Freigedo’s investment advisory, Global Investor. Selva has some great insights on the investment world outside of Oz.
I hope you enjoy those. And I hope you have a safe and happy holiday season, whatever your plans may be.
And if I can offer one last piece of advice it’s this. Be sure to take some time away from your screens. They’ll still be there waiting for you when you’re ready.
Finally, here’s the latest on the emissions wars from The Australian Tribune:
‘Energy Minister Condemns State’s “Reckless Targets” on Emissions’
‘Australians pay two or even three times more to keep their lights on than Americans.
‘We should be thankful then, that at least Australia’s electricity sector is on track to meets its emission reduction targets well ahead of 2030. Now the government and energy industry can concentrate on reliability and getting costs down.
‘Or so you’d hope.
‘But the Greens, many in Labor and even…’
If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.
And it’s absolutely free.
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