September 28, 2022 Leave a comment

The cratering in stock indices is afoot.

HSI and HSCEI today are doing so.

Opening gains in stocks are being given up as the past 2 days of trading is occurring.

Pessimism is growing amongst a host sentiment and survey indicators.

Really long term mean reversions are occurring or nearing.

Smaller investors seem jittery.

The AUD/USD is plunging. A visit to 0.6320 would be a 3 standard deviation event.

On September 9th, 2022, I wrote;

“I think prices will jump a little, drag in a few more people and then spit them out again in the coming week or three followed up with another swoon.”

https://robzdravevski.com/2022/09/09/not-trusting-some-of-the-signals/

And here we are…..

For a bit of sport, I think S&P 500 has a terrible day during Wednesday’s session and the Aussie market will give up its early gains then sink further on Thursday before traders swoop in and start buying 2 hours before Thursday close not before they dump the same stock into Friday’s close before their long weekend on the Australian east coast.

That’s the sort of market we have currently.

September 28, 2022

by Rob Zdravevski

rob@karriasset.com.au

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ASX 200 Registers Rare Monthly Overbought Reading

August 15, 2021 Leave a comment

This month, the ASX 200 has touched a “rare” Monthly (not weekly, but monthly) Overbought reading.

For the lack of a better word, I’m calling it rare as the chart below covers 35 years and this level has only been (generally) visited 5 times prior.

Such a moment is worth noting but it’s not an absolute ‘sell’ signal.

My work suggests a greater probability for higher prices or a ‘melt-up’ before we see a peak.

For now the upward trend remains intact and I’ll look for the index to touch 2.5 standard deviations (the upper end of the bands illustrated) above its mean before searching for exhaustion of the current bull market.

Keep in mind that prices can stay ‘overbought’ longer than expected and the constituents (and their weightings) have changed over the course of this charts history.

August 15, 2021

by Rob Zdravevski

rob@karriasset.com.au

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Market Quips & Synopsis – Sept 18, 2020

September 18, 2020 Leave a comment

Market Quips & Synopsis Some brief points about selected markets or assets and look for the links within for added musings.

About current markets, I’ll open up by saying..

I notice there is dangerous trading going on, market capitalisations in some companies are extraordinary.
For example, how does $1 billion market cap on revenues of $20,000 sound?

ASX scuttlebutt says, “shorts” are trying to pressure companies into raising capital, some are seeing increased stock “promotion” activity and there are many people in the market “that don’t know what they’re doing or shouldn’t be there”.

I see the AUD and XAU (Gold) in a holding pattern, (see the AUD chart below);
they need to hold 0.7240 and $1,902 respectively,
breaks above 0.7355 & $1,978 should see a new lurch higher

Also watching AUDJPY closely, need to hold 76.00 to confirm “more risk-off”,
A move above 0.7730 suggests “risk-on” and higher equity indices

Another indictor to assess the steam in a S&P 500 decline is whether Japanese 10 Year Bonds (JGB”s) trade below 0.00%.

The S&P 500 is down 6% from recent highs,
Indicators are not clear in calling a new downward trend, however I think 3,272 is the target (a further 2.5% lower).

The Nasdaq 100 has now fallen 11% since its September 2nd high.
Looking for it to ease a further 2.4% to 10,814 before determining the strength of the decline.
The decline wasn’t a surprise, as written by me on August 29 and September 3rd  

Global portfolios have a 3% short position in either (or both) the Nasdaq 100 or the SOX index

My ASX 200 target is 5,803, which is 1.2% below the price as I write.

I’m pleased with calling Oil down from $44 to $39.30. Brent held $39.30 for the past week, 
has since rallied 10% in past 4 days….quick rallies are not always a preferred scenario

VIX remains relatively high at a reading of 26, the call option phenomenon has influenced this increase

The De-Equitisation story combined with rising money supply & low interest rates leads to my thesis that higher equities is the dominant and over-arching long term theme.

While we accept near-term rates will stay Lower for a while,
I think the long end of interest rate curve will rise.

AAII Survey exhibiting narrowest bull/bear spread since June 11, which is when S&P 500 had a 8.2% decline.
Since March 5th, more retail investors have remained bearish (than bullish). This survey remains a reasonable contrarian indicator as markets bottommed on March 26th and never looked back.

Oil Rig count showing no meaningful change of increase, see attached, number of rigs in operation has halved

I remain long term bullish on the Oil price and continue to accumulate positions (proxies) to benefit from this opinion.
Incidentally, I have a view there is a coming crisis in energy prices which will stoke inflation (albeit it may be 18 months away) 

In another edition, I’ll expand on various investing themes and I hope to soon publish my bullish thinking about Platinum on my Linkedin page.

That’s all for now…

warm regards,
Rob

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First day of September wipes out August

September 1, 2020 Leave a comment

Below is a continuing chart I’ve been posting for a while to disprove the illusion that the Aussie equity market is NOT screaming to new highs.

For the past 3 months, the ASX 200 has been trading sideways and today’s headlines from the Australian Financial Review following todays close of business was…..

“ASX wipes out most of August gains in single session.
The S&P/ASX 200 dropped 1.8 per cent on the first day of September, falling back to where it traded on August 3”

It’s a bit sad that the first day of September’s trading erased the WHOLE month of August’s efforts.

In fact, the ASX 200 is trading back to where it was on June 3rd, 2020.

The age of the stock picker is back….

September 1, 2020
by Rob Zdravevski
rob@karriasset.com.auASX 200 sideways

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Looking for a 15% decline in ASX 200

July 20, 2020 Leave a comment

Today, the ASX 200 closed at 6002.

I am watching if the index will trade lower to “fill” the following “gap-ups”,

5918, 5803, 5604, 5394, 5055 & 4701.

Those are declines of 1.4%, 3.3%, 6.6%, 10.1%, 15.8% & 21.7% respectively.

I’m betting on it trading closer to the 5,055 level.

20 July, 2020
by Rob Zdravevski
rob@karriasset.com.au

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A Top in the ASX 200

May 26, 2020 Leave a comment

Today, we saw the “top”.

An old Wall Street proverb goes “nobody one rings the bell at the top”.

I am happy to go on the record to say today’s action in the ASX 200 registered the high of this rally which commenced March 23, 2020.

My work and signals suggest todays high of 5,780 shouldn’t be breached +/- 20 points within this immediate timeframe.

With humility, I was equally pleased in calling the 4,400 low on the ASX 200, which incidentally occurred on March 23, 2020.

– May 26, 2020, by Rob Zdravevski

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Neither a borrower nor a lender be

March 22, 2015 Leave a comment

The genius of James Packer continues.

Crown Resorts is a BBB rated company and they have raised $600 million in debt through the public markets at 4% above the bank bill rate, which means currently the total coupon will be 6.27% range.

The paper matures in 2075 but Crown can redeem them in 2021. Lenders own debt which is subordinated. They will rank below preference share holders and other capital market debt but above ordinary shareholders. The money is going to be used to finance projects within Crown Sydney & Crown Towers Perth.

So what they have achieved is to reap a stack of long dated capital at a cheap price without the onerous banking liens and it was raised easily because investors are simply chasing any yield.

Investors should consider not whether they are being “paid” enough to take this risk as a lender but whether they have considered the risk/return (even the risk of underperformance) of owning the shares of Crown Resorts rather than its debt would a better proposition. I’m not writing about Crown’s risk or ability to pay its coupon or return your capital but whether the herd has simply filed into another hybrid income product without thinking about it.

Think of it in terms of the return shareholders may receive as a rate of return over the cost of the capital once they complete the expansion of the various casino projects?

I forgot to say that James Packer’s family company, Consolidated Press Holdings (CPH), also bought $50 million of this debt. I’m sure this gave the new debt investors added confidence that he has backing it personally.

That’s fine, but CPH also owns at least $4 billion of Crown Resort shares.

Sometimes analysis is difficult and sometimes it can be simple.

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Price Is A Problem In The Absence Of Value

August 16, 2013 Leave a comment

The CEO of AMP is resigning, so I had a look at how the stock price has performed under his tenure.

Since being CEO, AMP’s stock has fallen 7% compared to the ASX 200 Index, which has risen 168% over that same time.

Hmmm……

BHP’s recently retired CEO oversaw a total stock return of negative 17% while the benchmark index broke even.

Qantas’ current CEO can brag that his company’s stock price has declined 46% during his watch vs. the index return of + 55%.

Myer’s stock price has left shareholders 14% poorer (and I am counting dividends)  under the current steward but the index has climbed 28% over the same time period.

English: Why Pay More?, No. 112 The High Stree...

But I can hear the cries already. They’re in a tough industry, it’s cyclical, they inherited a bad egg from the previous boss, it’s competitive and margins are tight.

Perhaps the board is equally to blame for poor stock price performance as much the management team that is charged to execute the strategy?

To contrast, the current ANZ’s boss has presided over a 42% total stock return whilst the index fell 3%, Westpac’s stock performance has been an impressive 90%, which handsomely beats the 15% return that the index managed and last of all, had you owned that boring old power utility, AGL when their present CEO took over, your total return is 55% versus the ASX 200’s negative 3%.

Some commentators talk about what legacy a departing CEO has left or the systems they put into place.

Whilst they are being rewarded handsomely (which I don’t object to), shareholders rewards should be somewhat aligned.

Don’t even get me started on their “golden handshake” severance pay.

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ASX 200 Is Oversold

May 17, 2012 Leave a comment

Today, the ASX 200 Index has moved into oversold territory.  See the chart below covering Oversold Moments over the past 4 years.

In a recent client note, I illustrated my prediction of the ASX 200 falling to 4,170 around the mid-July 2012 timeframe.

This level was breached today, 2 months earlier than I expected.

My work suggests that the ASX 200 is now creating a base before embarking on a new tactical rally. I have found this current “set-up” similar to previous occurrences where the ASX 200 and the Shanghai Composite indices have troughed 2-4 months before other Western markets.

Combining the “oversold” reading with increasing bearish sentiment, consensus estimates for the ASX 200’s fiscal year 2013 include a P/E ratio of 10.6, a dividend yield of 5.5% and a Price to Book ratio of 1.5.

The ASX 200 is now in a range that I refer to as a “fertile investing habitat”. The Forecast Earnings Yield of the ASX 200 is 9%, which 6% above the 10 Year Aust. Commonwealth Government Bond (ACGB) yield.

Recently, I have written that the Australian equities market is not an “outright” nor a “raging” BUY whilst the 10 Year ACGB yield remains below “at-call” deposit rates and especially the Reserve Bank’s Cash Rate.

Currently, the RBA’s Cash Rate is 3.75% and the ACGB yield is 3.27%. Should the RBA cut rates by another 50 basis points, this yield curve will soon become normal again.

With all this theory and probability, I am only expecting a “tactical” rally, which may zigzag its way higher into November 2012.

Beyond this timeframe, our longer-term cycle work will see us lighten positions as the end of the calendar year nears.

Sometimes, markets move to where they can do the most damage and presently, that direction may very well be UP!

Oversold ASX 200 Moment – 4 years

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