Interdum stultus opportuna loquitur...

Wednesday, November 24, 2004

Australian Market - A New Record Close

Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.

The mania (there... I've said it) that has hit the domestic equities market is now getting ahead of itself.

People's investment horizons are decreasing, and they are justifying to themselves (or equivocating) the purchse of low-yield assets on the basis of "the long term"... as if they have discount rates the same as elderly Japanese. At the same time, they need Harvey Norman to give them "no repayments unti l2006" so that they can get that must have flat-screen TV. (Speaking of which, HVN closed up 3.5% at $3.23 - and was the top mover in the ASX 100).

Anybody who watched "Insight" on SBS last night saw a pack of Hooray Henries (and Henriettas) talking like ghetto teenagers about "bling" (spare me from yet more Ebonicisms)... in the same breath as they claimed that they understood debt and could control it.

And these people - late 20-somethings and early 30-somethings - are the people whose future incomes have to finance the retirement of the largest age cohort in our history (i.e., their parents).

Like the American system , the Social Security system is not endogenously-funded. About 80% of people retire with insufficient funds of their own (and that number will always be that high, regardless of how much of the national paypacket falls into the snares of charlatans and fund managers... ooops... same thing!).

So unless the government decides to renege - increasingly they will have no option - the Social Security system will have to be funded out of tax revenue. And more retirees per capita means higher income tax rates per capita.

Households in this country are so leveraged that they cannot afford higher per capita taxation of any type. Since business owns both political parties, there will not be any headway made on taxation of corporate incomes, either.

Nobody is saying that all people between 25 and 34 are debt-addled tools, there are some (like my brother in law) who eschew debt even when it's constructive. However the debt mania has extended up and down the age cohorts like the Pox.

But I digress...

It's come to my attention that almost nobody does a decent job of market commentary on the Oz market anymore. A few people try, and a couple of them are friends of mine, so I won't bag anybody to much. Besides, they are so harried (and so very very underpaid) that you wouldn't believe it.

So I'm going to have a crack at it, for as long as I can be bothered.

Economic Statistics

I mentioned last night that the major stat out today was Building Work Done.

The consensus guess was for an increase of 0.9%, but the number disappointed, showing a fall of 2.7%. Total Construction work done (a broader measure) fell 1.2% for the quarter, too. So now we have a property market with falling prices and slowing supply-build...

That smell you can discern is large piles of squishy brown stuff in the breeks of the mortgage industry.

See yesterday's post here for tomorrow's domestic economic data.

Interesting News

Infrastructure groups have gone on a little gallop since the debut of the Scoresby Freeway (thanks for lying to to the electorate Mr Bracks... it keeps my opinion of politicians on a steady keel).

Bracks and the cronies he sold it to, can call it 'ConnectEast' or whatever they like, but the fact of the matter is that like all vermin who gravitate towards political corridors, they sold out the people who elected them, for the benefit of their mates.

The political furore may be "done and dusted" and Bracks and the rest of his parasitic co-vermin might get all smug about it, but if Bracks is really a Catholic (and not just a parasitic sub-species.... homo politicus immoralicans) he would have grave fears regarding his destination in the afterlife.

Anyhow... the Infrastructure segment of the market is awash with typical brokerish idiocy... "Oh Look!! Someone listed at a premium!! upgrade everybody else in the sector".

Macquarie Infrastructure Group (MIG) was up a tad over 3% to $3.90 as part of this "flight to bond-like equities".

Everybody has been a-flutter about the fact that the Herd (Merrill Lynch) had snaffled about 7% or thereabouts of Lend Lease, thinking that the "Be Bullish" (or is that "Bullshit-ish"? I forget) crowd might be acquiring stock as a strategic manoeuvre on behalf of a potential suitor.

To me it's more likely that there's and attempt to expoit LLC corporate action (the buyback) driving it.

It's as old as the hills; get your clients into the buyback (tax advantages) and let the rumour mill do the "is it a takeover?" crap for you. (Also it helps to take a gullible journalist out for a beer and "let it slip" that ML's been a big buyer).

BHP Billiton continues its ride to the moon - today BHP became the new New Corpse, trading about 20% of all exchange volume and rising another 1% to $14.98.

BHP Daily Chart

To my way of looking at things, the chart above is a reason to be worried rather than complacent. Sure, BHP has some oil operations, but let's not get too silly about this.

Major Market Indices

That's another closing record, unless I miss my guess.

This market is wayyyy over-bought, and it's ripe for a correction - of the order of 200-300 All Ords points. Obviously, that is not going to be precipitated by locals simply selling because they get nervy; it's going to require a downleg in US markets as well.

Paul Krugman is on the same page as I am with regard to the US economic end-game; take a look at his latest musings.

Anyhow - as I was saying, the All Ords has basically "gone parabolic" and is ripe for a decent correction; examine the chart below -


All Ords, Daily Chart

(You'll probably have to click on the chart to get a better view).

XAOAll Ordinaries3894.715.80.41%657.38m
XTLS&P/ASX 2020695.70.28%109.5m
XFLS&P/ASX 50380813.10.35%240.45m
XTOS&P/ASX 1003148.412.20.39%365.62m
XJOS&P/ASX 2003882.516.40.42%504.75m
XKOS&P/ASX 3003892.216.80.43%596.15m
XMDS&P/ASX Mid-Cap 503832.225.70.68%125.17m
XSOS&P/ASX Small Ordinaries2308.220.40.89%230.53m

S&P/ASX200 GICS Sector Indices

let me say this. I hate the stupid GICS sector breakdown. It is a dumbing-down of the sectoral analysis that we used to have.

I notice that the US still has all of its sensible industry categories, but some dickhead at the ASX decided that they would bend over and let S&P dictate what industry classifications we would use.

Over time, I plan to re-implement the old fashioned indices and display them. I have the index membership as of the tiem that the GICVS stupidity was introduced, and I think I'm clever enough to add new members in a sensible way.

For the moment we are stuck with the crap that the ASX defines.

CodeGICS SectorClose+/-%Volume
XDJConsumer Discretionary2298.3-12.5-0.54%34.08m
XSJConsumer Staples5300.149.50.94%25.41m
XIJInformation Technology368.982.22%12.13m
XPJProperty Trusts175417.91.03%68.72m
XXJASX200 ex Property Trusts461115.60.34%58.21m

All Ordinaries Volume Leaders

MULMultiemedia Com0.03406.25%40.51m
BHPBHP Billiton14.990.171.15%34.32m
HWEHenry Walker Elt0.52-0.14-21.21%27.88m

All Ordinaries Top 5 % Gainers

Somehow I managed to get the tables wrong today, but only at position 5. I'll fix that by tomorrow. Notice something though; it's speculative stuff that's rising fastest.

EOSElectro Optic3.550.412.7%407228
PSGPalm Springs0.170.029.68%648334
PEMPerilya Ltd0.910.089.64%2.92m

All Ordinaries Top 5 % Losers

CTYCountry Road1.75-0.17-8.85%500
IHGIntellect Hldgs0.043-0.01-21.82%6.8m
HWEHenry Walker Eltin0.52-0.14-21.21%27.88m
OTTOpen Telecommun0.33-0.07-17.5%7100

Main SFE Futures Contracts

Not much to report on teh SFe front; the SPI wasn't at a breath-taking premium to the physical market at any stage today. Bonds were reaonably active, but closed unchanged (or near enough as makes no odds).

SPI Intraday 10-minute Chart

SPI04ZSPI 200 Index SFE3898110.28%12781
IR04Z90 Day Bank Accepted Bills SFE94.570.020.02%66403
YT04Z3-yr T-Bond SFE94.870.060.06%83197
XT04Z10-yr T-Bond SFE94.660.060.06%21781