It would be remiss of us not to start this month’s Review with what was far and away the biggest event of the year, that being the election of Donald J. Trump. Four weeks ago he was given no chance of winning the Presidency with some market commentators predicting disaster to markets in the rare likelihood of his election. Today he is the President-elect with a wide range of business friendly policies ready to roll out when possible. The market reacted negatively upon seeing the first signs of Trump’s miraculous win.
October was a shaky month for the ASX200 which underperformed most major indices, finishing the month down around 3%. The market shot down to 5200 where there is clear support but whether it can hold this level leading into election week is another story.
Japan has always been a country with which I am fascinated. Almost certainly this was inherited from my father who dealt with Japanese companies for most of his career and much of this rubbed off on me. I’d like to hope my dealings in business and life reflect his tutelage.
So it was with interest I read in The Economist over the weekend about the current trend of expectant mothers to opt for doctors over midwives and painkillers over the absence thereof. Apparently women are traditionally expected to endure the pain of childbirth in order to better the bond between mother and child and prepare the mother for what lies ahead. I’m not about to question centuries of Japanese Buddhist tradition but as a long time reader of The Gartman Letter I’m always interested in fertility rates of advanced countries, on which this article touches. Japan, with a fertility rate of 1.5 children per woman and a non-existent immigration policy, has a has a declining population. A country requires a rate of 2.1 to replace its population and the Japanese Government is keen to get theirs at least up to 1.8 per woman.
Firstly some sad news. With all the work we do and all the research we read and compile and regurgitate, were I to write a fresh note I would almost certainly write something nearly identical to last week.
Fed looking like it will raise, bonds getting sold, USD rallying, OPEC deal can’t be trusted, markets are undergoing a sector shift.
No different from before.
So as means of a distraction here’s this from Investec regarding what part of the mining cycle (or “clock”) we are:
The Fed will hike in December. I don’t know a sensible person who isn’t now of that view. We were given a warning early last month of what would happen if they were hiked out of the blue and now, a month and a half later, we are now adequately conditioned for what is now a world at the bottom of the rate cycle. This being said, I’ll dust off some old notes (from September 20th) that are now the serious game plan for the rest of the year.
If you haven’t already, please check out our latest contribution to Business Insider’s ‘Devils & Details,’ the most popular business podcast in Australia. We cover OPEC, the RBA & the ongoing commodities rally. At the end I also tip the Swans and the Storm so I’m due a few wins this week I’d say.
Firstly, and as an apology, this note will be a prelude to something more substantial regarding what a Trump victory means for the USA and the planet. Whilst it’s not world ending, the world’s eyes are currently upon a very small handful of people and so we must assess its relevance and impact. For the dismissive amongst you I ask that you please remember the Brexit vote which impacted our markets severely on Friday 24th June. Whilst I predicted a vote for status quo by the British public, I never discounted the possibility that there is an ever growing disconnect between how people say they will vote and how they actually vote. I’m happy to engage anyone on the reasons behind the recent rise of this phenomenon, here is a link to the Wikipedia site regarding the ‘Bradley Effect’.
Last week a colleague and I took a tour of regional NSW (Orange specifically) to discuss portfolio strategies and China. VFS Head of Strategy and resident China expert Jack Kouzi gave a great talk on Chinese growth being more substantial than just GDP growth and iron ore exports, that their ambitions in other fields are a good indication of their overall intentions. One of the points Jack made was that China wants to put a man on the moon by 2025. That’s all good and well for them but it was on the long drive home that my brain started turning this over.
The art of good commentary is to be able to make grand statements sound conclusive whilst leaving plenty of wiggle room. Fan favourites include “markets were mixed today,” “this stock will almost certainly keep going up until it commences its pullback. Note this pullback may have already begun” and “it’s a stock picker’s market. You have to be savvy and switched on. The next week will be crucial…”