Interdum stultus opportuna loquitur...

Tuesday, July 15, 2008

OzRant: Brown Corduroy Time?

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

It's moderately satisfying to have been on the right side of this decline (having declared Rally.Over@ back in Feb, from memory), but a lot of damage is being done to people's government-mandated retirement funds.

As you all know, I was never a fan of the Superannuation Guarantee Levy; it was simply a tacit admission by the government that its modelling showed that the government pension system was facing demographic headwinds that made it unsustainable. That's what happens when governments promise the earth and try to fund it using a Ponzi scheme.

Pensions are not paid out of a pool of past contributions - they are paid out of the contributions of current workers. The upcoming retirement of the Baby Boomers means that there will be a fall in workers-per-retiree from about 7 down to about 2.5 over the next 15 years. It used to be 12.

Anyhow - so the government, rather than have an honest discussion about the issue, tried instead to sell the electorate a pup. During a bull market, that's well and good.

Don't get me wrong - I am all for the idea that folks ought to be responsible for their own retirement. However the government's plan came with all sorts of accoutrements that favoured that third-most parasitic of human - the fund manager. (In the Rant taxonomy of parasitism, it goes
(1) Politicians;
(2) bureaucrats; and
(3) fund-managers/brokers/financial planners).

There was a very tangible and palpable tilt in the system towards investment in stock-based managed funds, and an absolute paucity of good investment advice. Financial planners were far more interested in which fund managers provided the best breakfasts and the most CPD points (and the highest trailing commissions) rather than actually trying to teach themselves how to analyse a fund for themselves. And I say this as a former member of a fund analysis team that was second to none, but which had difficulty getting its foot in the door at large advisory groups, because the fund managers would white-ant the team behind our backs. The Fund Managers didn't love your beloved GT quite lkike you do, Dearest Reader - because he and the rest of the team of which he was a part, led capably by Mr Wright now at Zenith Capital Partners, were collectively prone to asking pointed questions during fund managers' "Research luncheons". Like when your beloved GT asked the 20-something head of the now-defunct BT TIME Fund - who had just claimed that B2B e-commerce would be measured in the tens of trillions by 2010 - if he was aware that world GDP was only of the order of 30 trillion... uncomfortable silences always arose after your beloved GT had put away a couple of glasses of the host's finest.

So what ended up happening (since bond funds don't pay high trails) is that pretty much anybody who went to a financial  planner got 90% of their endowment tipped into stocks - whether the client was 15 or 90. And moreover, planners had no idea of the actual investment merit of the funds they were using.

Back just before Easter of 2000, I became aware that BT had a load of absolute dross in its Imputation Fund. I wrote it up - calling the Fund a Sell - and me and my team got a bollocking from BT about it. These clowns had One.Tel in an Imputation Fund, for God's sake.

Of course I let BT know about the rating, and they knew it was going to be sent to the press as well. They asked to be given a chance to respond beforehand, and I was encouraged to sit on it. They stalled and stalled for two days, and finally I thought "Screw 'em" and sent it out on the Wednesday night before Easter (they were clearly trying to stall until the Thursday afternoon, thinking that the story would get lost over the long weekend). 

The Sydney Morning Herald ran it, and - more as a result of falls in stocks than as a result of redemptions - the BT Imputation Fund lost 7% over the next four sessions. {I hasten to add it lost that amount through declines in its portfolio constituents, and not due to my rating - the point is that the portfolio did not represent an Imputation Fund... it was more like a Tech Punters fund with the odd divvie-paying Industrial for appearances' sake. Even the most highly followed analyst can't move a thing that far from its underlying value}.

Now where is this heading.

Simply to point out that fund managers are no more prudent with their clients' money that your average stockbroker; furthermore, that the nexus between manager and investment advisor is disgustingly corrupted (and not just by trailing commissions - how is it that financial planners can claim professional development points by going to a breakfast put on by a fund manager?). And the whole shebang was orchestrated by government - they couldn't have concocted a better scheme to screw the punter if they had tried to do it deliberately.

Just as S&P and Moodys (and Fitch) have been the target of your beloved GT for their absolutely APPALLING lack of ability to rate things in a forward-looking way, so too have I long harboured a rage within vis à vis fund managers and their enablers... planners and politicians.

But let's get back to the present...

Major Market Indices

The broad market - the All Ordinaries (XAO) - dipped reasonably hard, registering a loss of 97.8 points (1.95%), finishing at 4910.1 points. The index hit an intraday high of 5007.9 at 10:00 am, while the low for the day was 4890.6 - set at 3:07 pm Sydney time.

Total volume traded on the ASX was 1.41 billion units, about in line with its 10-day moving average. The ASX's daily listing of all stocks included 1375 different 3-letter FPO's which traded (i.e., had non-zero trade volume). Of these, 590 issues rose, with volume in rising issues totalling 755.5 million units. Conversely (or even contrariwise), 486 stocks were dragged below the Plimsoll line, with aggregate volume traded of 539.8 million shares.

Yet again, O Reader, we get a fairly unpleasant downward lurch in the major indices, without the necessary panicky breadth data that would give us confidence in thinking perhaps the worst is past.

Tomorrow I'll start including increases in short interest in the OzRant (although it must perforce be with a 1-day lag, since the ASX releases daily short interest summaries at about 9 o'clock at night Oz time). Last time I looked, short interest was not high enough to make me think of the long side for anything more than a scalp.

Of the 495 All Ordinaries components, 130 rose while 312 fell. Volume was tilted in favour of the losers by a margin of 2.9:1, with 196.83 million shares traded in gainers while 567.07 million shares traded in the day's losers. Although the XAO stats are considerably more bearish than those for the overall market, it's still not the 5- and 6-to-1 ratio that you get used to at genuine 'Get me out!' bottoms. And it's not because investors are getting smarter either (everybody still thinks tht they can rotate out of big-caps and into small-caps... look at XTL/XSO and at stocks outside of the All Ords). 

The Index that forms the cash basis for the SFE's Share Price Index Futures - the S&P/ASX 200 (XJO) - dipped pretty savagely,rather savagely, losing 105.3 points (2.14%), closing out the session at 4815.7 points.

GT Intraday Chart
Name Close +/-(%)
All Ordinaries 4910.10 -97.80 (2.0%)
ASX 50 4699.00 -119.00 (2.5%)
ASX 200 4815.70 -105.30 (2.1%)
ASX 300 4816.60 -103.60 (2.1%)
ASX Mid-Cap 50 4768.30 -65.50 (1.4%)
ASX Small Ordinaries 2865.60 -6.80 (0.2%)
ASX 20 2691.10 -71.80 (2.6%)
ASX 100 3890.50 -92.20 (2.3%)

The "heavy hitters" of the Australian market - the ASX 20 Leaders (XTL) - was taken to the woodshed somewhat, sliding 71.8 points (2.6%), closing out the session at 2691.1 points.

Among the 20 big guns, only one component - Woodside Petroleum Limited (WPL) - kept its head off the chopping block. No huge surprise there - as goes the price of crude, so goes WPL for the moment.

WPL managed to add $0.90 (1.48%) to close at $61.60 and traded 1.9 million shares in the process. The 19 decliners had volume traded totalling 135.06 million units.

On the less salubrious side of the big-cap fence, the following stocks were the worst-performed within the index:

  • Macquarie Group Limited (MQG), -$3.45 (6.93%) to $46.35 on volume of 1.9 million shares;
  • AMP Limited (AMP), -$0.33 (5.09%) to $6.15 on volume of 5.4 million shares;
  • Wesfarmers Limited (WES), -$1.44 (4.44%) to $30.96 on volume of 2.8 million shares;
  • National Australia Bank Limited (NAB), -$1.05 (3.97%) to $25.42 on volume of 8.2 million shares; and
  • Suncorp-Metway Limited. (SUN), -$0.47 (3.87%) to $11.68 on volume of 3.5 million shares.

It's clear that people are finally starting to sniff around the balance sheets of financials - and perhaps even the odd non-financial which has a history of debt raising...

The ASX Small Ordinaries (XSO), while still dropping overall, did significantly better than its large-cap counterpart. The Small Ords slid modestly, falling 6.8 points (0.24%), closing out the session at 2865.6 points.

Among the stocks that make up the Small Caps index, 66 index components finished to the upside, and of the rest, 114 closed lower for the session.

The 195 stocks which make up the index traded a total of 270.46 million units: volume gainers amounted to 134.63 million shares, with trade totalling 115.15 million units in the index's 114 declining components. See what I mean about attempts at size rotation? On a day when the XTL is down two and a half percent, the small caps advance-decline ratio is less than 1.3:1.

The major percentage gainers within the index were
  • Allco Finance Group Limited (AFG), +$0.05 (13.33%) to $0.43 on volume of 13 million shares;
  • Sino Gold Mining Limited (SGX), +$0.53 (10.54%) to $5.56 on volume of 1.6 million shares;
  • Centro Properties Group (CNP), +$0.02 (8.7%) to $0.25 on volume of 57 million shares;
  • Charter Hall Group (CHC), +$0.05 (6.58%) to $0.81 on volume of 1.5 million shares; and
  • Alliance Resources Limited (AGS), +$0.07 (6.48%) to $1.15 on volume of 348.9 thousand shares.

In the red-zone of the little-stock index, the following list represents the biggest downers (in terms of percentage decline):

  • Marion Energy Limited (MAE), -$0.11 (8.47%) to $1.14 on volume of 479.7 thousand shares;
  • Compass Resources NL (CMR), -$0.15 (7.94%) to $1.74 on volume of 330.2 thousand shares;
  • Gindalbie Metals Ltd (GBG), -$0.09 (7.73%) to $1.01 on volume of 3.2 million shares;
  • Mirvac Industrial Trust (MIX), -$0.02 (7.5%) to $0.19 on volume of 770.2 thousand shares; and
  • Flexigroup Limited (FXL), -$0.04 (7.29%) to $0.45 on volume of 485.8 thousand shares.

Index Changes
Code Name Close +/- % Volume
XAO All Ordinaries 4910.1 -97.8 -1.95 822.8m
XFL ASX 50 4699 -119 -2.47 313.3m
XJO ASX 200 4815.7 -105.3 -2.14 712.6m
XKO ASX 300 4816.6 -103.6 -2.11 770.9m
XMD ASX Mid-Cap 50 4768.3 -65.5 -1.36 187.1m
XSO ASX Small Ordinaries 2865.6 -6.8 -0.24 270.5m
XTL ASX 20 2691.1 -71.8 -2.6 137m
XTO ASX 100 3890.5 -92.2 -2.32 500.4m
Market Breadth
Advances 1 15 51 130 66 590
Declines 19 83 140 312 114 486
Advancing Volume 1.9m 48.2m 171.2m 196.8m 134.6m 755.5 million
Declining Volume 135.1m 421.8m 492.6m 567.1m 115.1m 539.8 million
GICS Industry Indices

Among the 11 industry indices, today's market action was dominated by sectoral declines - only one sector managed a gain for the day. No prizes for guessing that it was Energy (XEJ), which added 80.4 points (0.44%) to 18353.2 points. The 17 stocks which make up the index traded a total of 39.67 million units; 11 index components rose, with rising volume amounting to 25.81 million shares, while the 6 decliners had volume traded totalling 13.86 million units. The major percentage gainers within the index were

  • Arrow Energy Limited (AOE), +$0.17 (5.3%) to $3.38 on volume of 4.4 million shares;
  • Felix Resources Limited (FLX), +$0.67 (3.6%) to $19.28 on volume of 527.7 thousand shares;
  • Paladin Energy Limited (PDN), +$0.12 (1.88%) to $6.49 on volume of 4.4 million shares;
  • Woodside Petroleum Limited (WPL), +$0.90 (1.48%) to $61.60 on volume of 1.9 million shares; and
  • Australian Worldwide Exploration Limited (AWE), +$0.05 (1.3%) to $3.89 on volume of 740.5 thousand shares.

The worst-performed index for the session was Financials ex Property Trusts (XXJ), which dipped 180 points (3.78%) to 4579.5 points. The 30 stocks which make up the index traded a total of 88.48 million units; The 24 decliners had volume traded totalling 68.25 million units, and 5 index components rose, with rising volume amounting to 20.22 million shares, The major percentage decliners within the index were

  • Platinum Asset Management Limited (PTM), -$0.21 (7.07%) to $2.76 on volume of 573.2 thousand shares;
  • Macquarie Group Limited (MQG), -$3.45 (6.93%) to $46.35 on volume of 1.9 million shares;
  • Challenger Financial Services Group Limited (CGF), -$0.15 (6.85%) to $2.04 on volume of 2.4 million shares;
  • Babcock & Brown Limited (BNB), -$0.38 (5.52%) to $6.51 on volume of 2 million shares; and
  • Bendigo and Adelaide Bank Limited (BEN), -$0.49 (5.09%) to $9.14 on volume of 844.3 thousand shares.

Just missing out on the wooden spoon was Consumer Staples (XSJ), which slid 239.8 points (3.56%) to 6486.8 points. The 11 stocks which make up the index traded a total of 30.43 million units; every stock in the index had a down day. The major percentage decliners within the index were

  • Wesfarmers Limited (WES), -$1.44 (4.44%) to $30.96 on volume of 2.8 million shares;
  • Coca-Cola Amatil Limited (CCL), -$0.28 (3.87%) to $6.96 on volume of 2.2 million shares;
  • Goodman Fielder Limited (GFF), -$0.05 (3.35%) to $1.30 on volume of 6 million shares;
  • Woolworths Limited (WOW), -$0.77 (3.16%) to $23.62 on volume of 3.2 million shares; and
  • Foster's Group Limited (FGL), -$0.13 (2.92%) to $4.32 on volume of 7.8 million shares.

Third-to-last amongst the sector indices was Property Trusts (XPJ), which slid 37 points (3.06%) to 1171.9 points. The 21 stocks which make up the index traded a total of 214.17 million units. 14 index components fell, with volume traded totalling 116.55 million units, and 4 index components rose, with rising volume amounting to 76.28 million shares, The major percentage decliners within the index were

  • Commonwealth Property Office Fund (CPA), -$0.08 (6%) to $1.18 on volume of 7.9 million shares;
  • Goodman Group (GMG), -$0.11 (4.64%) to $2.26 on volume of 13.6 million shares;
  • Macquarie Office Trust (MOF), -$0.04 (4.43%) to $0.76 on volume of 3.8 million shares;
  • Valad Property Group (VPG), -$0.02 (3.77%) to $0.51 on volume of 5.3 million shares; and
  • CFS Retail Property Trust (CFX), -$0.07 (3.75%) to $1.80 on volume of 9.5 million shares.

Sector Indices
Code GICS Sector Close +/- % Volume
XEJ Energy 18353.2 80.4 0.44 40m
XTJ Telecommunications 1456.1 -13 -0.88 48m
XMJ Materials 14207.9 -140.5 -0.98 118m
XHJ Healthcare 8058.9 -82.5 -1.01 7m
XUJ Utilities 5273.7 -57.1 -1.07 31m
XIJ Information Technology 484.1 -9 -1.83 1m
XNJ Industrials 4344.6 -118.1 -2.65 92m
XDJ Consumer Discretionary 1529.2 -42.3 -2.69 43m
XPJ Property Trusts 1171.9 -37 -3.06 214m
XSJ Consumer Staples 6486.8 -239.8 -3.56 30m
XXJ Financials ex Property Trusts 4579.5 -180 -3.78 88m

All Ordinaries Major Movers

All Ords Volume Leaders
Code Name Close +/- % Volume
CNP Centro Properties Group 0.25 0.02 8.7 57m
TLS Telstra Corporation Limited. 4.25 -0.04 -0.93 38.1m
OXR Oxiana Limited 2.19 -0.07 -3.1 23.3m
GPT GPT Group 1.44 -0.06 -3.69 21.1m
BBI Babcock & Brown Infrastructure Group 0.85 0.00 0 19.9m
All Ords Percentage Gainers
Code Name Close +/- % Volume
AFG Allco Finance Group Limited 0.43 0.05 13.33 13m
BVA Bravura Solutions Limited 0.95 0.10 11.76 33.3k
VBA Virgin Blue Holdings Limited 0.59 0.06 11.43 1.2m
SGX Sino Gold Mining Limited 5.56 0.53 10.54 1.6m
ESG Eastern Star Gas Limited 0.62 0.06 9.73 2.8m
All Ords Percentage Losers
Code Name Close +/- % Volume
SPH Sphere Investments Limited 2.10 -0.34 -13.93 40k
FEA Forest Enterprises 0.44 -0.05 -9.28 581k
WIG Wilson Htm Investment Group Ltd 1.05 -0.10 -8.7 4.5k
CPR Clive Peeters Limited 0.48 -0.05 -8.65 21k
MAE Marion Energy Limited 1.14 -0.11 -8.47 479.7k