THE MARCUS TODAY MORNING MEETING – Wednesday 25th May

Anyone who has been in broking will tell you that the Morning Meeting is how all brokers start the day.  The format is to have a quick look at the overnight markets, consider what's coming up in the day ahead, hear from the analysts, share ideas and get set up for the day's stock market activity

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Transcript

DISCLAIMER:

Marcus Today offers information that is only general in nature. It does not take into account your personal financial situation, needs or objectives. Nor does it take into account the financial needs of any specific person. You should consider your own personal financial situation and needs or seek financial advice before making any decisions based on this information. For more information please see our Financial Services Guide.

*PLEASE NOTE: Transcripts are autogenerated and may contain errors, especially Stock Codes and Names.

SPEAKERS

Henry Jennings, Tom Wegner, Marcus Padley, Layton Membrey, TEAM, Ben O'Leary

Ben O'Leary  00:00

Good morning everyone, Wednesday the 25th of May Marcus, you're on overnight for us this morning. What have you got?

Marcus Padley  00:20

I certainly am Ben and we're doing okay. Today we are 28 points or something futures were up eight, Dow Jones was up 48. The notable thing there was at one point it was down 500 points. So there's still a fair bit of volatility going on. And there are a few economic numbers which weren't that flash like new home sales down 16% fourth month on the truck, they've fallen. And we've got a whole bunch of GDP downgrades over the last couple of weeks, and UBS and JP Morgan downgraded Chinese GDP overnight, but the main event overnight was the NASDAQ down 2.35% Now oversold on a weekly chart, which is rare. And of course, the reason why is snap had results from the share price down 43%, which took Facebook or matter down 7.6% interest down 23% Twitter down 5% Google or alphabet down 5% as well. And it's all to do with tech. And if you look at the charts of the NASDAQ, as I say heavily oversold led the rest of the market down and our market really behaving quite well by comparison. So this really is a tech thing. It's set up for a bounce I'll get to that in the strategy stuff. The other thing some of you might have noticed today if you've got a not very clever share price provider I think CommSec even screw this up is bhp has gone exits Woodside merger today. And Woodside by the way has changed its code from WPL to WDS. And the share prices have been adjusted for that split off on that basis. BHP is up about 2% but you'll find that some of the lazy or not so good share price providers or platforms have got the share price down 9% today because they didn't adjust yesterday's share price which they're supposed to do and anyone who has a professional ASX feed will see bhp quite happily trading higher today and Woodside up as well. So that has created a little bit of value for bhp shareholders today. Otherwise interest rates remember they were over 3% Recently us 10 year bond yield now 2.75 Otherwise not too much going on. RBA had a speech this morning and was talking about slower population growth being permanent in Australia. We've got FOMC minutes tonight. And the other observation I'd make is the election has been almost irrelevant to share markets so far.

Ben O'Leary  02:40

Very good. Thank you, Marcus. Tom, any of that having much of an impact in our local market today?

Tom Wegner  02:45

Thank you, Ben. Yes, look, I'll just fill in the gaps that Mark has missed out on he covered most of the exciting stuff that's happening this morning re bhp and Woodside. But we do have miners and consumer staples outperforming tech is weighing on the market. Fisher and Paykel have full year results an interesting point from their release. They've sold 10 years worth of hospital hardware in the last two years thanks to COVID So the issue for them is is that growth likely to continue? Probably not and they didn't have any guidance on the back of that big cheese looking to sell one veggie might weigh in Port Melbourne and BG H capital has upped its offer for Virtus health and VR T Virtus. Health is now waiting on cap vest to see if it plans to improve its offer. So that bidding war continuing as Marcus said, we did have an RBA speech from assistant Governor Lucy Ellis this morning, although not expected to move the needle too much and in the US FOMC minutes from the May 4 Meeting round out the day. Thank you, Ben.

Ben O'Leary  03:50

Very good. Thank you Cyrus Layton anything much from the brokers this morning?

Layton Membrey  03:54

Thank you, Ben just having a look at lottery Corporation this morning. They were part of that demerger with Tabcorp yesterday and they listed at $4.61 They closed up around $4.70 Morgan Stanley has said that the demerger is a catalyst for unlocking value and Morgan Stanley and Macquarie both have initiated coverage overweight with an average total price of $5.08, which implies and apes and upside and also Pilbara minerals they realise sale price exceeded Macquarie's price expectations by 9%. And the broken notes that lithium carbonate, lithium hydroxide and SpiderMan are all trading above short, medium and long term forecasts and its spot pricing could drive earnings well above Macquarie's forecasts through to 2025. Now the broker has retained its outperform recommendation and target price of $4 which implies a 38% upside. Thank you Ben.

Ben O'Leary  04:47

Good stuff. Thank you. Layton. Henry, are you up to today?

Ben O'Leary  04:50

Just waiting today about I guess snap which as an old person, I still struggle to get my head around the message service that disappears after you read it and how you can advertisers and create revenue from that. And whether that is the canary in the coal mine for the US economy, or whether it is just a problem, which Facebook or meta has alluded to in their last announcement, which is the Apple privacy settings have really damaged a lot of these social media companies. And I don't know if you guys are the same, but the number of ads that appear in my social media feeds these days, which have absolutely nothing to do with any of my interests is quite remarkable given that it used to be so targeted. So I think some of snaps problems are because of that. So just a bit of a summation of where the US is, it's a bit of a hotchpotch at the moment but also looking at some of the things driving our market still like the commodities thing. And as Leighton was talking about yesterday that Pilbara for the BMX band it auction was last night and a pretty good strong result from them. I think, Macquarie if I could be mistaken here, but if you put in spot prices into some of these lithium companies, the upside is absolutely crazy stuff. I still like the commodity space, especially given where inflation is at the moment hard to believe that the Germans have 7.1% inflation and the ECB is just thinking about going from negative to neutral rates just thinking about it at the moment. So clearly, there's lots of play at the moment but our market being commodity based is going to outperform and has been outperforming even today we're of course seeing that just an aside last night I also did on the couch session with the CEO of a uranium company listed in Australia I say which one but it's one of the the bigger explorers come near producers a couple of projects South Australia Northern Territory also luckily for me, potentially, they have a project in Italy and northern Italy. So I'm thinking about a bit of a site visit for some tax deductions there later this year. Also, just a heads up doing equity mates tomorrow, so I'm going to be actually doing it in person in the city. I've had 130 comments of stocks they want analysed in 20 minutes. 

Marcus Padley  07:01

You can manage that?

Ben O'Leary  07:03

I think I'm gonna have to get it boiled down to about the 20 most popular but I don't know how much notice I'm gonna get but it could be quite fun.

Ben O'Leary  07:10

I don't think anything else much harder than the 100 questions in 100 minutes you do on Ask Analysts? 

Ben O'Leary  07:17

Yeah, but they're my people. They're my peeps, you know, the people that I know and interact with? So and I kind of know vaguely what stocks they're going to talk about these ones are all you youngsters, and they're going to be very left I'm sure the question the number one question will be when do I buy Tesla? 

Ben O'Leary  07:31

Well you are you prepared for that one.

Marcus Padley  07:32

other guy, I can tell you how to answer all those questions, Henry, you get a little laptop in front of you with a charting package. And just as half those commentators Do you want a chart up and then talk knowledgeably about where it's been and where it's going, you've discovered my thing, even the other one, even though you've never heard of it, it's always staggered me that those people go on and pretend they know about stocks, they've only just heard off anyway. 

Ben O'Leary  07:57

And that's what I do. The other great way of doing it causes the coin toss.

Ben O'Leary  08:01

I was thinking maybe in Eight Ball.

Marcus Padley  08:04

But I did a course at UBS Phillips and Drew, which was how to sell financial products. And it told you that the reality is you don't know what the future is for a product. So if you're selling a managed fund, you don't know what the returns are going to be. But if you told people you don't know what the returns are going to be, you'd never sell any product. But if you tell them confidently that it's 9% return for the next 10 years. And if you compound that you will triple your money, then you'll sell product. So confidence sells was the point. And so if you can sit with your laptop and confidently say something rather than the truth is no one really knows, then you will get traction. And that's what people do. And that's what finance is about. It's 99% marketing. It's saying things confidently about stocks that will get more traction, so more newsletters and that's what the people that.

Ben O'Leary  08:52

The issues now if you say confidently that something will go up at 9% and you'll triple your money, you'll get a knock on the door from ASIC, about two weeks later.

Marcus Padley  08:59

Well, no you won't. Because 9% is the average statistic for everything going back in history ever to do with finance, including what the property market goes up every year in the stock market. So there's good defence for that

Ben O'Leary  09:10

And Asika got way too much to worry about. There's so many other things without worrying about.

Marcus Padley  09:13

People saying the market goes up 9% per annum...anyway...

Ben O'Leary  09:18

You got to look at the the movement in Saona mining which has absolutely cratered on massive volumes and now today they're in suspense because they're doing a capital raise. Yes, they should be looking at that one. 

Ben O'Leary  09:29

Interesting. Anyway, we shall move on. Thank you, Henry. Chris can't be with us today. He is preparing for his chart chat at midday which is probably about the time that this is released. So if you're supposed to be there, get on your computer now and tune in he's also got his chart of the day as Grange resources in the trading section today. So check that out as well. And Marcus back to you for strategy.

Marcus Padley  09:48

Strategy. I haven't yet finished the strategy piece as you'll see but probably has finished by the time people are listening to this but I think the strategy goal has to be the same if you look at NASDAQ, which is the LI eet market at the moment for sentiment. If you look at the NASDAQ, it is just still cratering. As of last night, it is oversold for the first time since the pandemic. And prior to that since 2011. On a weekly chart, very rare and index is oversold on RSI, which is not a technical instruction to go and buy it or anything is simply an observation that it's falling very rapidly at the moment, in which case you don't want to be buying it until it shows some signs of bottoming. So the strategic goal has to be the same, which is there's a buying opportunity coming but it's not here yet or not here today. Anyway, somebody emailed about log charts when you look at charts over a long period of time and attempt to draw lines on charts and come to some sort of technical conclusion about a market going up or down or a stock going up or down. If you look over a long period of time, you're supposed to use a log chart. So just to satisfy one email, I have put in a log chart of the NASDAQ and a log chart of the ASX 200. In the strategy piece today. You can you can have a look at those. But what it shows you is that since the GFC, which was the last seismic event, the markets all all the markets except ours but particularly the NASDAQ got way out of the top of its long long term log trading range. And he's now back in it but he's heading down. If it was to fall to the bottom of the trading range, it would fall about 10% From here, which is not too scary. I don't think as far as our market is concerned, we didn't get overbought, we're at middle top of the trading range at the moment. RSI is 43 on a weekly chart, it's closer to oversold and overbought anyway, there's nothing scary. But I would also point out it's not at the bottom of the trading range, which is about 11% down from here. So sentiment could get worse if you were to believe which I don't lines on a chart and particularly a log chart. The other thing I've addressed today is I was reading or listening to Peter Lynch's books on audible and Peter Lynch was making as he's trying to filter stocks. He was making the point that one of the good filters is to have a look at companies that are doing share buybacks. Usually that's a sign of a company that has done well. But at the same time a company that doesn't have much imagination. And so it's the stall walk companies as he calls them. And when you look at our share buyback announcements just this morning companies like Telstra Commonwealth Bank, origin Santos all doing buybacks at the moment, and that provides you a list if you wanted to go and have a look at safe stocks, you might go and look at those because obviously their balance sheets are in good shape. And that was about that for me today.

Ben O'Leary  12:28

Very good. Lots of good stuff as always. And Question of the day to finish which is the Henry's question from the Facebook group this morning as well. What is your go to sign of economic slowdown Thomas?

Tom Wegner  12:39

This one I came across the other day and it is an increase in my social media feeds of crypto scams. And I thought if they were doing well and the businesses were doing well, they wouldn't have to scam people. Scams. There were crypto scams. 

TEAM  12:53

Oh yes.

Ben O'Leary  12:55

Isn't the whole thing about crypto is that it is a scam. It's just a scam on a scam.

Ben O'Leary  13:03

If you ever get a message from someone that says I just made $20,000 in crypto, Click here to find out why do not click there.

Marcus Padley  13:09

And then I was joking about is there a scam? 

TEAM  13:15

Laughter.

Ben O'Leary  13:15

Layton.

Layton Membrey  13:16

This is one that I've noticed recently, but I think it's also partly due to COVID. But all of the happy hours seem to disappear from all the pubs around, so.

Tom Wegner  13:25

Searching for one pub with...

Ben O'Leary  13:32

Inflation issue as well I think. Henry?

Henry Jennings  13:34

Well, I put this question on Facebook and one of the responses was the number of jet skis and quad bikes for sale on Gumtree in Western Australia, which is a fair thing and the suburb I live in is proliferated by real estate agents. We have more real estate agents and coffee shops than anything else and it would be good to see one or two of them close but at the moment there's still thriving lists they seem to be thriving. So I guess I one of the things I look out for is empty shops in in my local suburb and places that close unexpectedly in the middle of the night and have the locks changed on them as always a sign that maybe things are slipping into recession as well.

Ben O'Leary  14:10

That's not a good sign when he locks have changed overnight. Marcus?

Marcus Padley  14:12

That is actually a good indicator as net shops at the moment because the COVID hangover is not being reversed very quickly. I would say I would just tell you the story of the head of resources in corporate finance at Patterson's back in 2007, who was on a boat of a CEO of a mining company racing over to Rottnest Island for that swim they do bank which is a corporate event. And he said there they were on this boat screaming across from Fremantle to Rottnest and huge boat and they were overtaken by the CEO of another mining company with a load of stockbrokers on the back flicking the signs at them and then a helicopter with a bunch of other stock brokers buzzing the two big boats As they went past and he was flicking visa, he said he stopped dead any when he realised, oh my god, it doesn't get to look any better than this. And he said he went down the front of the boat inside sold every stock he had, because he couldn't get to look any better than that. And he was absolutely right because they were very close to the top of the resources boom at the time, he was doing more corporate deals and patterns. It's so many corporate deals, but that was a sign of times the other the other sign of the top was in 2000. stockbrokers never list right stockbrokers are like accountants, they make terrible corporate companies because the partners are used to distributing all the money to themselves and salaries or bonuses before a shareholder ever gets to it. So you'd never really invest in a stock broker, in my humble opinion and stock broker would never bother listing because they don't want the transparency the responsibility of other shareholders and in 2007, three stockbrokers listed and all of them went from $2 down to below 50 cents and a couple of them down to 10 cents. So if you see people in the financial markets selling their companies, you know, it's a bubble, and it was in 2007.

Ben O'Leary  16:06

Very good. I think mine would be kind of similar to a story you've told before. I think about Patterson's where things were going so well. They bought the naming rights to the stadium right SUV Yakko Yeah, so my one is starting to see vacant sponsor spots on sports jerseys. And there's a couple of AFL clubs that have crypto exchanges across their back and I reckon we might see some vegan spots coming up on those jerseys soon.

Marcus Padley  16:27

You're right, like crypto ads everywhere, isn't it?

Layton Membrey  16:29

crypto.com and eToro.

Ben O'Leary  16:32

Yeah, so very interesting. Thank you guys. Wrap it up. See you tomorrow.