When historians look back on what words to describe November 2017 with, “lithium” and “Bitcoin” would be sure to make the list.
Lithium, cobalt, graphite and the Pilbara gold explosion all made some spectacular gains.
The rally in Bitcoin put them all to shame though.
The banks, which must have thought they’d finally dodged all the bullets aimed at them, were given a month-end gift of a Royal Commission.
Our view of an RC? It’s on the bank’s terms (for now). It’s soft & will focus on the bad parts of banks that are already known, like Storm Financial and ATM fees. It won’t focus on the big disaster looming which is a full assessment and audit of mortgage applications to see how many have had things brushed over or fudged to gain approval. I personally think that serviceability is the biggest risk facing Australia’s housing market and if suddenly it was known just how little amount people could actually pay of their debt there would be a rush for the exits in Australian housing.
But at least millennials could finally afford a house.
I think the Commission will focus on super funds. Big funds should be scared because there’s more than a few skeletons in their closets. What was interesting was the fact ASIC wasn’t consulted on the Royal Commission announcement. That’s an interesting signal that maybe they’ll find themselves in the hot seat over a few interesting misses over the years on their watch.
However this is a Royal Commission. Not just a regular Commission. A ROYAL Commission. The Queen’s involved and she’s in for a few shocks…
Seriously though if there is a change of Government sometime over the life of the RC (12 months) then it’s possible we see the terms changed to be more in line with what Labor is after. Then it’s on for young and old.
Bitcoin was the other notable event for November and whilst we don’t formally cover it we’re still obliged to keep up with what’s going on in all markets. Bitcoin smashed through $10,000 USD and very soon after $11,000 as well. I’ve heard it thrown around that the Bitcoin bubble is much like the Tulip bubble of Holland in the 1600s. Something that may interest readers is this after-dinner speech by Pierpont’s Trevor Sykes in which he gave a beautifully readable and detailed history of the Tulip mania. Link is here but this is an interesting point on how the tulips were actually traded. It wasn’t on a regulated market.
Over to the states and the month started with talks on the risks of the Fed unwinding their balance sheet, which then gave way to talks of how the yield curve was slowly becoming inverted and how that indicates recession. The month ended with near certainty of a Republican tax bill becoming law very soon.
Funnily enough, not one of these things held the US market back. Long and strong in the US until the story changes.
See the graph above- December has never been a “worst month of the year”.
Highlights from the Trading Desk
The market moving with more direction made for an excellent trading environment.
Locally the team had some very well timed trades in CBA (Long prior to its 3% rally before closing) and trading Woodside Petroleum as it swung wildly on oil price & various news. Short into a $2 drop and long as it reversed. The benefits of multi-directional trading.
Profit was taken on the US-listed Internet ETF FDN and other opportunities are being sought.
The Global Macro Fund has ridden a graphite winner through the month with Syrah (SYR.ASX) rallying over 20%.
For further information please contact us on the links below.
(Oh, almost forgot. Amazon quietly launched)
Stay safe & all the best,
James Whelan & the VFS Investment Committee
Level 30 Australia Square, 264 George Street, Sydney NSW 2000
t +1300 220 360 | m +61 407 958 036 | www.vfsgroup.com.au
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