## On Lithium, Unsurprising Retail & Making Insurers Great Again ##

By October 5, 2017Investing, Lithium, Macro

Anyone who read my last missive would have noted how strongly bearish retail I was at the time. This has not changed. Yesterday’s retail numbers were just the confirmation I was after as well.

Remember how my outrage at accidentally paying $40 for a USB cable at Officeworks was enough to drive me to the keyboard and hammer the keys with thunderous fury? Imagine how I felt opening my quarterly electricity bill last week and finding it 40% higher than the same quarter last year. This is Australia. This is all of us. We’re all in this together.
And this is how we’re responding…

NO. COMMENTARY. REQUIRED.

The biggest monthly fall since March 2013 and there was little surprise from the market. Harvey Norman, my barometer of awfulness, continues to break down despite Gerry’s best efforts to berate & bully the financial press.

Can’t argue with the price… Courtesy Interactive Brokers

So that’s that. Christmas, and our good friends Amazon, are coming.
Also from last week’s note “All the talk at the moment is on two things: Lithium and Crypto-currency. After a coin flip I decided to look at the latter.”
The “crypto” space is fascinating but have you seen the former? Lithium has continued to rally along with the stocks attached to it. Our preferred play as mentioned in our September Webinar is Albemarle which is listed in the US and is the world’s biggest producer of lithium. If you want to know “why lithium?” then read this from Paragon Funds Management which details just how big the space is becoming.
Click here to read the report at Livewire
When Government policy starts driving real change, be on the right side of that change and invest boldly.

Albemarle daily chart telling all the story here       Courtesy Interactive Brokers

Last thing on a short note (don’t all thank me at once) is the astounding dog of a local stock QBE managed to find more bad news behind the couch and rushed to tell the market as loudly and proudly as possible. In retrospect that’s better than hiding the news and selling your stock before the announcement in the case of Equifax so that’s one thing QBE has going for them.
The company announced the hit to earnings caused by North American natural disasters which increased from “sizable” to “substantial” was now being upgraded to “calamitous” and the stock was, predictably, sold off. This is a company that we thought had finally figured it out once again getting some bad breaks.
However….
Is this it? Is this the end of it? The market can’t take any more dirty laundry and I don’t think they have any more to air. Then this was put in front of me by the Twitter account @Quanterrific detailing how closely QBE trades to the US 10 year Treasury yield. This isn’t news in itself since insurers make more money in a rising rate environment (remember Confucius) but sometimes it’s good to cut through the noise and remember what the company actually does for a crust.
There’s a gap forming & it needs to be filled…

US 10 year yields in the purple, closer chart below showing the divergence.

If you believe yields are going up AND you believe QBE has exhausted its quota of bad news then finally it might catch a break…

US 10 year yields in the purple, mind the gap…

Don’t forget about our short webinar in two weeks. Just a quick overview of what’s going on. Register here.

Stay safe & all the best,

James Whelan & the VFS Global Macro Fund
Level 30 Australia Square, 264 George Street, Sydney NSW 2000
t +1300 220 360  | m +61 407 958 036 |  www.vfsgroup.com.au/gmf

Additional: Our own Head of Financial Advisory Danilo Medojevic has been shortlisted for the finals of the SMSF Adviser Summit Awards in the field of SMSF Investment Strategy. We wish him all the best to get the gong. 


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