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Zombies in NYC, calling a correction and come dine with me

Wall Street not selling off, a shooting in LA airport, a drone takes out a Taliban leader, insurance companies cancel millions of health policies because of Obamacare and Halloween zombies takeover the subways of New York City — just another day in the USA!

My interest in NYC is usually Wall Street-biased but I’ve been checking the weather as well, as this time last year Hurricane Sandy and Mayor Bloomberg cancelled the New York Marathon. My son Marty was there to race at the time, and after training another year for this marathon, it looks he’ll be running. Friday’s temperature was 22 degrees and it’s raining but Sunday will be a brisk 2-11 degrees and sunny!

The four-legged lottery

Back home, it’s Derby Day and I suspect some of our subscribers could be reading this on the train between Flinders Street station and Flemington. Though some will be doing the form and might return to the more reliable conveyance for making money — shares — on the trip home, with slightly lighter wallets and purses!

This time it’s different

This week two big events took me out of my usual routine. The first was an Odyssey House  lunch with WAM’s founder, Geoff Wilson, who has joined Investor Mutual’s Anton Tagliaferro in thinking a correction is coming. He says our market is up about 36% since June 4 last year and therefore is due for a correction or pullback.

Here we had four days down out of five and the ASX200 index went from 5441 to 5411, that’s down 30 points or 0.5%, which reconfirms to me that we’re going to need a decent trigger for the overdue correction, whether you call it 5% or 10%.

Regular readers know I can’t see a trigger, so as Geoff pointed out, it might be a left field X-factor event, which by definition, is unforeseeable, until it happens!

They’re expecting a correction on Wall Street as well, as Paul Nolte, managing director at Dearborn Partners told CNBC.

“I think the markets are in a correction phase after a nice run from mid September to late October,” he said. “Earnings are okay, and as a whole have beaten lowered expectations. Revenues are not fabulous, so it’s still managing expenses, which companies are doing a good job of. Top-line growth is a lot harder to come by in the current environment.”

But maybe this time it’s different because of an odd thing called QE3 tapering.

Bob Doll, who used to run equities for the world’s biggest fund manager, Blackrock (who I interviewed in New York a few years back, when I took my Switzer show to the Big Apple), says tapering creates a ‘can’t lose’ situation.

“I don’t want to act like I can win both ways, but in a sense I can,” he told CNBC late last week. “If [the Fed] keeps providing all this liquidity, it’s great for the stock market, and if they begin to taper, it’s because the economy is doing better. Then I get a better ‘E’ on my earnings front. So I’m reasonably sanguine.” (Doll is now senior portfolio manager at Nuveen.)

This is why I say a correction is overdue but it might be a small pullback because many investors see 2014 just like Doll. So, every dip becomes a buying opportunity and thus the dips are shallow. Only an X-factor event will change that.

A night with Rupert

On Thursday, I went to the Lowy Institute night at the Town Hall, where the star attraction was Rupert Murdoch, who delivered a very positive speech about Australia’s opportunities. It was a monkey suit affair and there were blasts from the past, which included Col Allan, the Editor-in-Chief for Rupert’s NY Post.

Col is the guy who allegedly put the Daily Telegraph’s front-page headlines on steroids during the election, and is a legend of the newspaper game.

The inspirational end line was Murdoch’s, who told us: “We must be leaders, not followers.” Leadership in this country and the companies we invest in is critical — ask David Jones, Treasury Wines and others that have disappointed lately.

Best line of the night went to the head of the Lowy Institute, Dr Michael Fullilove, who, in referring to the international consternation over the US phone tapping, pointed out that the Germans were outraged that their leader’s phone was tapped, while the French were outraged that their leader’s phone wasn’t!

Charlie’s Angels

For a recap on Charlie’s week, this is what he thinks is heaven sent. He’s taking out insurance with AMP. He’s still charging at the banks, and that’s no bull! He’s teasing the short sellers with JB Hi-Fi’s sweet sounding profits this week, and restated his belief in Cameron Clyne’s work at NAB, which now has a $40.80 price target!

Please pummel the Poms

Quote of the week came from Brian Smith, former Wallaby and coach of London Irish, who threw out a lifeline to the troubled James O’Connor, whose Wallaby contract was torn up recently: “Young men are the same whether they’re from my generation, my father’s generation or this generation. They’re ambitious but sometimes they need direction.”

Quote everyone should hear: “Everyone is replaceable because the team comes first.”

Well said Will Genia, Wallaby halfback, who’s regarded as the best in the world, and who was replaced for a couple of games this year by new Wallaby coach, Ewen McKenzie. Ewen has been Genia’s Super Rugby coach for the past three years and is an enormous fan — now that’s leadership!

The Wallabies play the Poms tonight — let’s hope we can beat them at something.

Top stocks – how they fared

Numbers that moved the market

When Glenn speaks, we listen [1]. This was more evident than ever on Tuesday, with the Aussie dollar falling from around 96.2 US cents at the start of the week to around 94.5 US cents after the RBA boss’s speech on Tuesday. In his address to Citi’s 5th annual Australia and New Zealand Investment Conference, Steven’s said “…it seems quite likely that at some point in the future the Australian dollar will be materially lower than it is today”.

“Some point in the future” turned out to be that afternoon!

Australian building approvals [2] surged ahead in September, rising 18.6% yoy and a whopping 14.4% on the August figure. The total number of dwellings approved was 16,318. The data show that this housing bull still has plenty of legs, but I’m far off accepting claims of a property bubble.

European unemployment [3] hasn’t come down since its initial GFC induced spike in 2008. In September, unemployment in the Eurozone rose to 12.2% driven by Greece (27.6%) and Spain (26.6%). Austria and Germany were at the other end of the spectrum, with 4.9% and 5.2% unemployment rates respectively. The thin light blue line below (higher line) is the unemployment rate for the 17 countries in the main Euro area, while the dark, thicker line represents the greater European area (28 countries in total).

The week ahead

November 4 Monthly inflation gauge (October)
November 4 Job advertisements (October)
November 4 Retail trade (September)
November 5 Reserve Bank Board meeting (and the Melbourne Cup)
November 6 International trade (September)
November 7 Employment/unemployment (October)
November 8 Statement on Monetary Policy

November 4 US Durable goods orders (September)
November 5 US ISM services (October)
November 6 US Leading index (September)
November 7 US Economic growth (September)
November 8 US Non-farm payrolls (October)
November 8 US Personal income (September)
November 8 China trade data
November 9 China monthly data

It was a big week in finance just gone, and the one coming up will be much the same. On Tuesday, the Reserve Bank will have their monthly meeting. A rate change is very unlikely – by Cup Day in 2014, rates will be on the up.

Aussie jobs figures for October will be released on Thursday – unlike Europe’s result last week, we’re expecting a pretty good result. CBA’s Craig James is tipping employment to rise by 5,000 which will see the jobless rate remain around 5.6% – 5.7%.

The US will also see their main jobs indicator this week – with non-farm payrolls data coming out on Friday. The government shutdown is expected to have had an impact on the jobs number, with CBA tipping a mediocre 149,000.

Calls of the week

The US Federal Reserve’s [4] predictable call to continue supporting the economy through their $85 billion-per-month Quantitative Easing program. The Fed noted that despite the recent dramas in Washington the broader economy is improving, but the “Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases”

I agree with Richard Coppleson [5], from Goldman Sachs, that a 9.75% rise on the market over the next 6 months looks like a safe bet.

The High Court’s call in what The Age’s Tony Wright [6] called a case of coitus interruptus. The story goes like this: a public servant was on a business trip when she became enamoured with a man she met while out on the town. The two retired to the woman’s taxpayer funded motel room, and during the “vigorous bout on non-sleeping” that ensued, a light fitting above the bed came loose, causing the woman facial injuries. The case made it all the way to the high court where her claim was rejected.

This week Penny Pryor went over a number of the calls we’ve made of the past few editions of the Super Report. You can read this wrap up here [7].

Last week’s TV roundup

Records tumbled this week, with US stocks reaching all time highs, the CBA share price entering unchartered territory, and NAB posting their biggest ever profit. But unarguably the most important milestone happened on Friday afternoon, with a record breaking turnout at our Monthly webinar. Watch the recording here [8].

Tom Waterhouse [9] drove one of the fastest growing businesses in Australia and recently created a deal with one of the biggest bookmakers in the world. For a look at the ups and downs of the past year, and to share his tips for the Melbourne Cup, Waterhouse joins Super TV.

One of the country’s best stock pickers, Geoff Wilson [10], discusses why Wilson Asset Management sold Warrnambool Cheese & Butter shares and whether he is expecting an upcoming correction within this bull market.

With house prices on the rise, a number of economists are predicting interest rates to start climbing again in 2014. I caught up with seasoned property guru, Chris Grey [11], to talk about the issues facing the housing market today.

Peter Thornhill [12] is a shares fanatic who loves a stock market crash. To find out what’s behind this bizarre conclusion and how it can help you prepare for retirement, Peter spoke with Super TV.

Stocks Shorted

ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short – which could suggest investors are expecting the price to come down. The table also shows how this has changed compared to the week before.

Despite pulling back their short position by almost 2% this week, Monadelphous is still the second shortest stock at 13.79%. Other big movers this week were Kingsgate (1.87% shorter) G.U.D. Holdings (shorts retreated 1.57%), and Paladin (1.01% shorter).

 My favourite charts

Newcrest investors – look away! As requested by a subscriber this week, here is a chart of the rollercoaster that is the price of Gold. Switzer Super Report co-founder, Paul Rickard, has never made any secrets about the fact that he is not a fan of gold and I think this chart shows why.

NAB posted a record profit this week. Their share price dipped on the news, but they are still in a very good spot over the past 12 months. NAB is the orange line, while the ASX200 is the green line. As Paul wrote a couple of weeks ago [13] – it looks as though NAB has run up pretty hard.

Top five clicked on stories of the week

Peter Switzer: Stocks to rise 9% over the next six months [5]
Charlie Aitken: Time to get Telstra before everybody else does  [14]
Rudi Filapek-Vandyck: Buy, Sell, Hold – what the brokers say [15]
Paul Rickard: Pension phase focus – Protecting your purchasing power [16]
James Dunn: AMP – the elephant in the room [17]

Last week’s Switzer Super Reports

Thursday, 31 October 2013: Back to the future [18] 
Monday, 28 October 2013: Don’t get jumpy [19]