Marcus Today Free Podcast

THE MARCUS TODAY MORNING MEETING – Wednesday 15th June

June 15, 2022 Marcus Today
Marcus Today Free Podcast
THE MARCUS TODAY MORNING MEETING – Wednesday 15th June
Show Notes Transcript

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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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, Chris Conway, TEAM, Layton Membrey, Marcus Padley, Ben O'Leary

 

Ben O'Leary  00:00

Good morning everyone, it is Wednesday the 15th of June Marcus, what have you got for us overnight?

 

Marcus Padley  00:19

Morning Ben, we have Wall Street down 152 At one point it was up 174 spy futures down 40 And our markets been down 47 currently down about 40 and our 3.55% Fall yesterday. I would just note that our market rallied all day yesterday, but this morning, we are dead in the water ahead of the FOMC meeting, which is tonight. 4am our time I think and we're not doing anything until then the volumes I believe are very low today. And I'm not sure anyone's going to make any big decisions. Still, the FOMC are out of the way the themes overnight were all to do with interest rates bond yields in the US have picked up the 10 and two year and inverted they only inverted briefly the night before last but the 10 year now or the Ozzie 10 year is now 4.076% over 4%. You do wonder if banks use market interest rates for particularly fixed rate mortgage rates or setting fixed rate mortgage rates. You do wonder whether mortgage rates aren't going to go from under 3% last year to possibly double that in a year's time or so which will obviously scare a few people. That aside. The main newswire theme overnight was that the chances of a 75 basis point rise from the FOMC tonight have gone from 3% A week ago to 30% Two days ago after the CPI number and they're now up to 89%. So expecting a 75 basis point rise tomorrow. Their rhetoric will of course be important and the markets beginning to factor in 275 basis point raises in the next two meetings by the way a 75 basis point rise from the Fed tomorrow would be the biggest single one meeting rise since 1994. Our markets now down 13% from the top s&p 500 is down 22% from the top NASDAQ's down 33%. From the top oil metal on all the commodities generally weaker overnight resources a bit weaker as well. This morning banks are levelling out quite nicely bitcoins down another 4% There is a crypto crashed which has happened already really it's down 67% from the top now some stocks which are seeing some rises today which is quite interesting because at some point the market will bottom and people will be looking for which stocks to buy. Macquarie is up a little bit today for the skews also up a little bit today has been terrible performer in his recent fall and the banks are a little bit today. So tech stocks still down after pay. So I'm stealing your thunder here. Tom afterpay. I think I've got a strategy day to day we've got Bank of Japan on Thursday, Chinese industrial production retail sales today, and that's about that they're all on hold waiting for the FOMC tomorrow morning.

 

Ben O'Leary  03:01

Tom, anything more to add on what's happening today?

 

Tom Wegner  03:04

Thank you, Ben. So I'll just fill in some of the blanks hawkish comments from Philip Lowe yesterday. Also he spoke with FSA they're adding to some of the risk of feeling today and golden calling for 350 point 50 basis point hikes from the RBA. In the next three meetings as well financials and utilities that only sectors in positive territory. big four banks are all improving as Marcus said we had APRA today outlining its macro prudential framework saying the banks need to have systems in place to limit high risk loans that seems rather obvious and is it also understood to be considering a bid for my OB healthcare and tech stocks continue to feel the brunt of the sell off hub 24 Down 2.3% they reiterated a platform growth target for FY 24 Atlas Terrior al x down 3% as reports come out that the IMF feed or IMF is in no rush to bid for the company and weekly consumer confidence of 7.6%. Now at levels not seen since April 2020 When everyone was concerned about the pandemic.

 

Ben O'Leary  04:13

Very good. Thank you Tom was to take in their Layton what's happening in the brokers world today?

 

Layton Membrey  04:18

Thank you, Ben more bank commentary out this morning from Credit Suisse have updated their view on the banking sector and noted that retail banks have fared much worse over the past week and business banks with Westpac, CBA, NAB, and ANZ all down more than 10% and Zed is the brokers preferred of the Big Four with NAB coming in second than Westpac and CBA. finishing it off has been no changes in the recommendations and Zed has the only overweight recommendation. The others are all neutral and their target price is around 15 to 20% above the current share prices but the target price for a and Zed is $30.80 Which implies about a 40% upside and also looking at James Hardy industries this morning as Jay h x Cory believes that James Hardie is positioned for a tough market and believes it is still supportive of renovations activity broker recognises the macro outlook may not support James Hardy over the short term, but there is meaningful opportunity once conditions settle. They've got an app form recommendation there with a target price came down slightly to $56.35, which implies a 75 cent upside.

 

Ben O'Leary  05:25

Very interesting. Thank you Layton Christopher, what have you got in your trading session today?

 

Chris Conway  05:29

Thanks, Ben. Just letting everyone know, of course that we exited all of the positions yesterday and removed any risks that we had off the table in the trading section. Today I'm taking a look at hub 24. And I wrote this up before the announcement this morning about their fun. This was a market darling there for a while it rose from $6 in March 2020, up to $35 in October 2021. And then has rolled over sharply lower fund growth, adding less advisors to the network, negative market movements and margin compression in what has become a very competitive space has seen that share price rollover. And it begs the question Are the conditions about to get better or worse for not only hub 24. But a lot of the wealth managers. I think at the very least we're not likely to see a repeat of the conditions that led to the fantastic share price growth anytime soon. So a difficult outlook for how 24 and the market reacting negatively to that announcement today. Just on the back of that chart this morning, I had a question in the Facebook group. And it was basically about looking for technical signals of when to get back into the market. This was a question from Nick. And I would just say that we need to be driven by the evidence technical fundamental, whatever method you choose, as we always say here, Marcus today you don't predict just react to the evidence when it comes in. So there are no technical signals just yet to jump after. 

 

Ben O'Leary  06:37

Very good. Thank you, Chris. Henry and the beep What are you up to today?

 

Henry Jennings  06:40

Well, I'm up to the beat really. It's been an interesting morning. I've had the electrician in this morning and in the newsletter today I have the electricians view of the RBA because he was privy to me recording the podcast and video this morning. So he had some interesting thoughts on what the RBA is doing. Of course, we did see last night Phil Lowe on the 730 report are talking about inflation, something that we flagged a week or so ago of that 7% print after I listened to Sarah hunter from KPMG. Talking about her working through the inputs to inflation, of course we have inflation on a quarterly basis released as opposed to others that have it monthly. So next reading is July 27. On that also last night I was at the AIA There we go. There's my friend, the AIA last night, which was fantastic to catch up with a few familiar faces for that their meeting in Chatswood, which was really well attended and some great questions from people. But it was very much focused on inflation, very much focused on the bear market, what's going to happen, how high rates are going to go when the market is going to bottom. But people seem to be relatively sanguine, and even yesterday when our market drops like the proverbial stone, and the market actually was relatively calm at the lower levels. And as Marcus said, it did spend the rest of the day kind of rallying up the futures in the US helped, of course, but it wasn't too bad. Today, we're seeing a bit more of a loss again, and yesterday, I sold some of the dogs in the small caps and also sold out half of my hedge position and bbose said rightly or wrongly, but it did look as if it had been a little overdone, but I'd still think we're still struggling to find that bottom. But certainly there are some bulls and there's some bears out there. But the volume is very much drying up at the moment as everyone remains on the fence. But the electricians view is definitely worth listening to or reading because he had some interesting things to say about what the RBA is doing and put it very succinctly.

 

Marcus Padley  08:31

And what was that Henry? Well, basically without question that was our macro guide. Anyway.

 

Henry Jennings  08:37

He's the man in the street is the man on the Clapham omnibus. And basically he said, you know, well, the RBA said that the rates weren't going to rise to 2024. So that one's gone out and borrow to the hilt. The government has told us to go out and enjoy ourselves spend money and spend the stimulus because that's what it's there for and to promote the economy and now the RBA saying no, no, you can't possibly do that. We're going to put up interest rates because we're worried about the price of lettuce and the price of petrol. Now RBA putting up interest rates to kill those new homebuyers that have borrowed up to the hilt in the last five years on the back of the RBA saying go out and borrow guys is not really going to put any kind of handbrake on petrol prices, energy prices, or the price of lettuce or food which to some extent is a derivative of those high energy prices. So he was somewhat puzzled why the RBA would want to kill the economy and kill all these new homeowners on the basis that they were trying to rein in the cost of lettuce, which does seem a little bit you know, obviously, the RBI only has one tool at its disposal, and that is a blunt force instrument. And I said to him, it's a bit like chemotherapy. If you have cancer, you hope that the chemotherapy works before it kills the patient or before it kills you. And that is obviously what the RBA is doing. I also pointed out the bear in mind that we have yet to even reach 1% on interest rates in this country official interest rates anyway and that in Europe despite the fact that there are economy and their inflation is over 8%. Germany came in at 7.9% the other day for May they have yet to actually go into positive territory from the ECB, it is still a negative rate. You know, it's a blunt force instrument to really whack inflation when inflation is being driven this time by something that is somewhat different is not being driven necessarily by demand. It's being driven by supply and that fuel problem that we have, which is a direct result of the Russian Ukrainian war to some extent, so he was somewhat puzzled, and I guess he was also somewhat concerned he wasn't a new homebuyer. He was a 45 year old vintage, but he certainly was concerned for some of the young people that had bought and leveraged to the hilt to get a step on the property ladder in Australia.

 

Marcus Padley  10:47

Yeah, and you do wonder, I mean, he makes a very good point, maybe we should employ him but you do wonder why the RBA are reacting when the elements of inflation that are running above average inflation at the moment include petrol prices, airfares, transport, hotels, all host pandemic issues, used vehicles, new vehicles, again, pandemic induced energy, obviously food at home. Well, no one's got any sympathy for people who are ordering food at home and furniture. And those are the only ones that are operating above average inflation. And those are not things necessarily that interest rates are going to have an impact on...

 

Henry Jennings  11:26

And you know, what is perverse as well as the New South Wales Government. I don't know what it was like in Victoria, but they give us vouchers to go and spend on hotels. So you can guarantee that the hotel prices have gone up, the regions are buzzing because more people are getting out there and discovering tourism in the regions and we get a $50 from Dominic to spend on a hotel. So you know, it's like first time by grants being elevated, just pushes up prices, because now you've got a bit of a freebie. So you know, it's it's questionable. And the same applies to the US how much they can control inflation with only one really blunt instrument, which is interest rate.

 

Marcus Padley  12:02

The point I'm trying to make there is all those above average elements are either Russia inspired or pandemic inspired. So it's not in a cyclical economy thing is usually why you'd move the monetary policy around anyway. There we go.

 

Ben O'Leary  12:17

Very interesting conversation there. Marcus, what are your view got in strategy for us?

 

Marcus Padley  12:22

Well, we did everything yesterday, we cleared out the ideas portfolio, I think we kept the proxy for the Chinese market ETF that was about it. Just to make the point really, and cleared out the strategy portfolio to cash. We had an ETF over the s&p 500 won over the NASDAQ one over the ASX 200. So just going to cash just to make the point you really have to assess at times like this, after things start to accelerate lower, you have to assess whether it's likely what the themes are, and whether they're likely to persist, or it's just a blip. And my assessment was, it looks like they're going to persist, I think it's going to take us months to get over our inflation, interest rate and recession uncertainties. And I think the Fed are probably going to go hard tonight and set the mood for at least the next month and it's not going to be great. So out of the market, sitting back and the article today is about how to handle a correction and I'll let you read that. But the bottom line is that we should welcome these exploitable moments, they are the fabulous the exponential irrational exuberance bits at the top of the market and the fearful despondent, capitulations. At the bottom the extremes are the best opportunities and they are what make the market worthwhile for active investors. These moments of stupidity, absurdity, fast ridiculousness and nonsense are brought on by people's irrational fear and irrational exuberance, we should expect them look forward to them and use them not avoid them. So any good investor watches and exploits the herd. So don't join the herd. And that's really what the article is about today. And that's about that. I mean, we're on hold for for the FOMC. And we'll see if they perpetuate this trend, which is what we're set up for or bounce it. I think even if they bounce it, I think bounces are going to run into resistance.

 

Ben O'Leary  14:15

Certainly plenty of headwinds around the answers and we're finished with Question of the day I think it's going to be a one with split opinions today. And that is is there a price where you would buy bitcoin? Tom?

 

Tom Wegner  14:26

I think Bitcoin got to $1,000 I'd have a look just to play around and say I've got one because you know, it's it could it could be worth a million dollars.

 

Layton Membrey  14:36

Layton I've already lost money in the crypto market. So I'm a little bit tentative, but more aggressive than Tom I think if it got down around 15,000 Then I'd have a look at starting to maybe buy in.

 

Ben O'Leary  14:48

Chris?

 

Chris Conway  14:48

Nope, to hard to value.

 

Ben O'Leary  14:50

Fair enough; Henry?

 

Henry Jennings  14:50

No, it's a massive Ponzi scheme. 

 

Ben O'Leary  14:53

Marcus?

 

Marcus Padley  14:53

I'm slightly disappointed Tom and Layton that you would pull a number out of your bottom at which Do you think Bitcoin would be a buy? I think bitcoins a binary decision, you're either having an accepting, you're having complete punt on something that's valuable, or you just avoid it completely. And obviously I'm in the avoid camp. I don't need to be betting on crypto on my small bet on the Irish beating the English rugby, which they won't.

 

Ben O'Leary  15:20

I've got a somewhat similar path. And so when every single person is saying bitcoin is dead, I'll buy a little bit just in case.

 

Marcus Padley  15:26

Yeah, actually, Tom made this point earlier that half of the stock market when you've got companies with no earnings, half the stock market is well, there's no value to that company anyway. So you're really just trading in a herd sentiment? So if you want to treat the herd sentiment, yeah, if it gets itself into an absolute hole, I suppose you might...

 

Ben O'Leary  15:43

I think if you bought on headlines that said bitcoin is dead, and you sold on headlines and said Bitcoin to a million, you'd probably have done pretty well over the last...

 

Marcus Padley  15:48

But you can't pull out 1000 time and you can't pull out 15,000 There's a marker in the sand. You've got to wait for the moment where Bitcoin jumps 20% in a night, and that's the night you're buying. 

 

Ben O'Leary  16:00

Haven't you seen Tom's Bitcoin models? And he's got a whole pricing formula...

 

Ben O'Leary  16:04

Bootstrap...

 

TEAM  16:06

Laughter 

 

Marcus Padley  16:06

No, we used to have an employee when we're in the financial planning business, who had made money out of Bitcoin. And when we got upset with him and said, You've got to stop talking about Bitcoin because it's distracting other colleagues. And if you so much as mentioned Bitcoin to clients, it's outside the AFSL. You just can't do it. And he said, Well, excuse me being obsessed, but I've just made $250,000 out of $5,000. Of course, I'm interested in it. And of course, I'm going to talk about around the water cooler, and you sort of think Well, yeah, he's the smart one.

 

Ben O'Leary  16:38

Very good. Thanks, guys. Very interesting. See you tomorrow. Thank you.