• The US has the FANGS but our market has its own bunch of stocks that are leading the way. Unfortunately, because of their size and the dominance of the banking sector, the ASX 200 barley registers a tremor. However, be under no illusion these stocks are roaring ahead. All we need is a funky acronym to sum them up. The stocks are Wisetech (WTC), Bellamy’s (BAL), Blackmores (BKL), A2M, Kogan (KGN), Lovisa (LOV), Galaxy (GXY), Orocobre (ORE) to name a few of the performers. Readers are invited to come up with their own acronym.
  • While our market flip flops around 5900 on the headline ASX 200, the ASX 200 accumulation index which takes into account dividends, is at an all-time high. The strong sectors are showing huge divergence from the unloved sectors. PE expansion is increasing, and a good narrative is trumping all. Numbers help but hope and optimism are filling the void between results.
  • If you ever want to see irrational exuberance Bitcoin is a bubble writ large.

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  • Its the economy stupid. Once upon a time Bill Clinton suggested that this was really all that matters. Looking at the performance of the US market and the administration that seems to be the case. US unemployment is 4.2%.
  • Wages are starting to stir. Inflation is dead. Interest rates are still at record lows despite some moves higher and the currency is sufficiently weak to stimulate corporate profits. Add in the tantalising prospect of tax cuts and massive infrastructure spending and it is easy to see why the US market continues to push higher.

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  • Apple at a record high. Crazy. This is on the back of positive reviews of the new iPhone 8. This snappy piece of kit costs a huge $1079 for the base model. Nearly $1500 for an iPhone 8 with 256GB of storage. That is a lot of money. It remains to be seen whether sales follow reviews, or the upgrade is justified. Not that is going to hold back the US market given the recent results from the tech behemoths. We bemoan the fact that we do not have a tech sector, but we have baby formula and lithium who needs technology.

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  • Last night on Sky Business we started a discussion on small caps and nano cap stocks. Adam Dawes from Shaw said these stocks were too speculative and not for mum and dad investors. Given that the institutions do not really buy into the small and micro end and that international investors don’t either, someone must be buying these stocks. The truth is that it is mum and dads. We are a nation of punters. We put $11bn through the pokies last year. We have a holiday for a horse race. There is huge wealth being created in the small cap sector and mining stocks. It is seriously hard to get rich by buying Woolworths or Brambles but multi baggers appear commonplace in the small end of town. It carries risk but there does appear to be many punters that are willing to take that risk. The interesting point comes when the current irrational exuberance finishes but what is the alternative, property. Seems that demand is waning. Remember too that there is a whole generation of traders and investors that have grown up post GFC and have not seen a significant pullback since 2008. That is a long time for some fund managers. Nearly half a lifetime. No wonder they believe that it is different this time. Maybe it really is.

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  • Last night Fortescue Metals’ (FMG) CEO Nev Power announced that the iron ore mining was looking at lithium exploration. Given it is all dirt and FMG have got very good at digging the stuff up and then treating and trucking it this is an interesting development. For years part of the attraction of FMG has been its laser like focus on iron ore and NO diversification. It was focussed on costs and building infrastructure. Been there done that it seems. The same infrastructure that FMG uses to get its ore to port will come into play if and when they discover lithium. The market may feel a little uncomfortable about this, but the attractions are obvious, and it does help legitimise the sector. Some compare the growing lithium sector as the new iron ore boom. Could well be. All FMG would have to do is invest in a Blockchain business to compete the themes at the moment to kick the share price. It remains to be seen how successful FMG will be but they are looking for elephants in elephant country. Plenty of resources surrounding their Pilbara projects. Given Twiggy’s remarkable success it will be interesting to watch the next chapter in the FMG story.

Clarence

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