In a sign of things  to come, after the Royal Commission, APRA went on the attack disqualifying a number of senior officials in IOOF – one of the major Australian wealth management group.

It practically never happened before.

https://www.investordaily.com.au/superannuation/44118-apra-commences-disqualification-proceedings-against-ioof?utm_source=InvestorDaily&utm_campaign=07_12_18&utm_medium=email&utm_content=1

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The Bismark was the largest and more powerful Nazi warship.

Huaweii is the largest Chinese tech company. It dwarfs ZTE and, while Tencent and Alibaba are prodigious internet -selling machines, Huaweii is into the hardware…much more important.

So it is an important and “to the core” hit. The investigation started in April 2018.

Huaweii has always been considered to be China tech arm – so much that has been banned for 5G networks in Australia and New Zealand and the ban is in consideration in Canada, Germany and UK.

It is a proper ban as it is quite renown that  Chinese products leave backdoors open for the MSS, the Chinese spy agency.

But the Chinese anger on it has to be moderate. The US could easily ban the sale of US products to Huaweii and this would be so much more damaging that any trade war.

Probably China could arrest some US citizen – but it will have to be a non-trade-war revenge as Huaweii is too critical to China.

 

This will spur even more the Chinese to produce chips and hardware in China – not an easy feat.

The new cold war has just started.

After two exhausting months…one is really starting for the Santa Claus Rally.

If it does appear – and I believe in Santa) two dates are important.

A) 1st December – meeting President Trump – President Xi – a mildly positive statement (like freezing of tariffs) would be a positive for the market triggering some short covering.

The China issues is a the only constant in Trump’s life. Since the 1990s he has identified (correctly) China as an issue for US world dominance. Even so, he is pragmatic and listen to his voter -base. Plus always looks at the market as a vote on his Presidency. He could well take a pause.

19th December – The last meeting of the year of the FED will be followed by a release statement for 2019 rates hike. A hint of a dovish take (less than the 3-4 rates hikes in the FED forecast) would definitely spur a rally.

Already 2 of the members of the FED declared that the interest rates are close to neutral for the FED and the FED is aware of the global slowdown and end of the tax -relief growth spur.

Let’s wish Santa to come!

The 15th October I told the clients that we would have issues – even telling them that we could see the low of February.

Unfortunately I was right, even if I hoped for a V style correction – now it is almost certain will be W style.

This correction is doing a lot of damage. When it will finish? Good question – most probably end of November – where Trump-Xi probably will agree to an armistice  in the trade wars.

Unfortunately we are at the edge of the end. Usually the market bull ends in a sharp correction (now, than a sharp bounce and then the end. Probably by Q2 2019 (March-May 2019).

Bear market does not mean a Global Financial Crisis 2 – that was a systemic failure.

An average Bear market last 13 months and it is defined by top to bottom loss of over 20%. Usually the market than recovers in two to three years.

The best way to address a bear market is

  • Not panic
  • Diversification
  • Cash aside to buy good companies at great price

Platinum, with Magellan and few others, is one of the premier Australian international fund. It actually was the first great Australian managed international fund.

Its shares have been going nowhere (mostly down) as the performance are lagging Platinum International 6.4% vs 19% MSCI Index, Asia 4.9% vs 10%. On a six month basis is even negative.

This shows great resilience of Platinum in front of a retail client.

A smart manager can see that the market is frothy and we are heading for a cliff. So it has to prepare the portfolio for the next cycle as he has a precise view of the risks and potential future.

But it also suffers backlash from clients (as cash outflows) as the retails clients see cheap ETF alternative as winners.

In the long run smart managers like Platinum, or Magellan are winners. But retail clients even if he knows that money (specially super) is for the long run – often say so, but see it differently.

This is a conundrum for the smart manager. and it is always sign of real skill to stay the course even in the face of market backlash.

US yield break out!

Posted: October 4, 2018 in Uncategorized

Finally the US 10 year broke with decision the previous top!

It is at 3.18% with a target 4.5%. Inflation will come!

But ..wait a minute…the market did not collapse!!

In reality if you analyse the last bond bear market 1952-1980 (yes that far away) there are takes.

1. 1952_1972 the market went more or less up

2. 1972_1980 the market went in dive…but only after the USD leaving the gold standard, oil embargoes, Nixon etc.

3. It is so far away that so many lot things changed.

In effect a few other events have to happen to start a crisis.

But they are all there…oil, Trump, trade wars. So maximum alert.

Many institutions will start to pay attention to 3.5% _3.8%.

One sure consequence is that the mortgage interest rates will go up and Australian real estate down.

President Trump at the U.N.

Posted: September 27, 2018 in Uncategorized

President Trump went at the UN and they laughed at him.

 

Actually there is nothing to laugh. He made clear his “America First” idea, chose us of them kind of politics and refusal of international rules.

He also mostly praised regimes with an authoritarian bent (Saudi Arabia, Israel, Poland etc) and kind of avoided mentioning more democratic regimes like France and Germany.

It all had of a kind of flavor of Germany and Italy early 1930 (rise of the fascism).

Even the tariff war with China is slightly developing in a more military war. The US sanctioned the Chinese military as they bought Russian jet fighters and the Chinese forbid the USS Wasp from making a stop in Hong Kong.

Thucydides, a old Greece historian, said about the Peloponnese wars, quoting

“it was the rise of Athens and the fear that it instilled in Sparta that made the war inevitable”.

A lesson from 2400 years ago eerily sound familiar. For the record, Sparta, the old power, won at great cost.