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From wedding bells to closing bells, it’s been a great week
The working week began with a car trip up the Hume Highway, leaving the Melbourne marriage of my son, which went off like a dream, behind. However there was a fatherly price to pay — Dad volunteered to drive the newlywed’s car back to Sydney, so it’ll be there when the European honeymoon ends! We parents are forever slow learners, but it did give me a chance to contemplate some valuable investment issues over the 873 kilometre trail.
And more than that, I got a chance to live in awe of the courageous heroes who were driving along the Hume in their CFA fire trucks in a convoy of courage, as they headed towards the Blue Mountains to fight these Red October fires. As someone with a property in the Mountains, I will forever be in debt to those men and women who hailed from as far south as Westbury in Tasmania! When you see that kind of thing you know, despite our statewide differences, we are a people bonded by our history, our loves, such as cricket, and our threats!
No clear and present danger
On the subject of threats, few things seem to be rocking the confidence of share players, making me feel a lot more confident about my call of 5500 for the S&P/ASX 200 at the start of the year. We finished at 5386.3 yesterday, so all we need is about 114 points and we’re there, and it doesn’t look that hard.
That said, Investor Mutual’s Anton Tagliaferro was quoted tipping a correction is on the cards. I think most rational people would agree but I suspect these are not rational times.
One US market commentator made the observation that probably one-third of the market’s huge run up since the GFC-crash of stocks was down to the Fed. The rest was based on the stumbling recovery. It’s why the Fed’s tapering of QE3, which I think will be next year (well after the next round of debt ceiling dramas scheduled for early February), will eventually push stocks down for a time. However, eventually the realisation will come that the US economy can grow without the Fed, and that will push stocks up again.
The latest on US Earnings
The current US reporting season helps the S&P 500 continue its drive into all-time high territory. At the half-time mark, earnings are up 4.5% against an expectation of 3% and while revenue readings are not as good company to company as was hoped, they’re still up 4% and that’s a rising trend. If economic data can surprise on the better than expected side, then this bull market keeps on rallying.
My likes for the week
Despite recent rises, the US stock market is still seen as fair value.
Bonds are as popular as Anthony Mundine at a Jeff Fenech BBQ! This is good news for stocks, as money has to go somewhere.
The Aussie has dropped from its US97c level to be at US95.18c this morning — I know it’s bad for overseas holidays but it’s great for stocks.
Reading this from Charlie Aitken: “In Australia, shorters have got pretty much nothing right. In fact, they have mostly been spectacularly wrong. Australia is the “Killing Fields” for shorters, and as GDP growth recovers, I expect that to continue. The short pain trade in Australia has been so big in selected Australian stocks this year that I suspect many shorters may simply rule Australia off from this point as a place to short.”
My rational fears
The US index, the S&P 500, has been up four of the past five years and it has put on double-digit gains in those years. But the historical average is more like 6% and so when do we revert to the mean? Of course, the index dived 50% in 2008, and the Fed has been playing the kind of game you need when a Great Depression threatens. But it does make you think about when all this delightful money-making madness stops? Well, that’s part of our job here at the Switzer Super Report, so keep watching this space, though I’m not readying myself for an imminent bailout.
Charlie’s angels in cattle class!
Charlie built a great wall of support for Crown in a week when bonny Prince George was christened and our own Princess Mary was at home. He turned the heat up with Suncorp. He put a $6 tag on Telstra and booked another flight on Qantas, despite downgrades to cattle class!
Go Charlie and go the fire fighters!
Top stocks – how they fared
Numbers that moved the market
My favourite charts
The State of the States
CommSec’s Craig James ‘State of the States’ report always produces great charts and this edition was no exception. When looking at a retail spending it’s easy to see why WA is again the top state.