Shareswatch Australia

For the last few years I have been warning that steps needed to be taken to prepare the Australian economy for when the commodities cycles would turn downwards. Back when I first started writing about this, it was almost considered treason to even suggest the mining boom may draw to a close. But these days even the RBA, Treasury and Wayne Swan are talking about the end of the commodities boom.

The Australian stock market has posted some good gains recently with the ASX All Ordinaries Index and S&P/ASX 200 Index both closing above 5100 yesterday. Instead of the markets showing some weakness as I expected, they appear to be rallying even despite falls in commodities prices and warning signs that the Chinese economy may start to slow again. This makes it difficult to get a feel for where the markets might be heading and economic stimulus measures in the United States, China and Japan complicate the outlook even further.

It has been quite a week with investors needing to digest the slump in gold prices and also the weakening of commodity prices as well.  Although I have been warning about both a gold and commodities bubble for some time,  I have to admit I didn’t expect the gold price to fall back quite this much, this early.

Since mid last year, the Australian stock market has staged a fairly impressive rally with the ASX All Ordinaries Index moving from a decidedly bearish level of down near 4000 to a bull market level of just under 5200 points. But of late the market has slipped back which will worry some investors, while others see this a simply a pause before the rally upwards continues.

Since mid 2012 the Australian stock market has been on a roll with the ASX All Ords & S&P/ASX 200 both closing today above 5100 points as the bull market continues. When I last looked at a few 52 week high and low stock prices the All Ords/ASX 200 were around 4300 so not surprisingly most stocks are now trading much higher and investors generally should be a happier lot than they were back then. However some stocks have actually fared relatively poorly since October 2011 and this may help us understand what might be moving the stock market at the moment.

Recently every move upwards the stock market takes, no matter how slight, is greeted with almost ecstatic cries of joy from many analysts, finance journalists and assorted market watchers. It’s as if the ASX All Ordinaries was heading towards a new high and investors were being showered with money in the midst of a raging bull market that had no limits. Certainly there have been good returns of late for those investors who timed their entry into market almost perfectly, but for longer term investors it’s more of case of here we go again.

Back in May 2012 when I last reviewed the performance of the Shareswatch Random Stocks Portfolio the S&P/ASX 200 (XJO) closed at 4165. On the 25th January the ASX 200 closed at 4835 which means the XJO has risen by around 13.85% since the last review.  So it will be interesting (for me at least) to see how this randomly selected collection of stocks has been performing against this ASX 200 Index.

In 2012 the Australian stock market finished the year higher with the ASX All Ordinaries Index posting a gain of around 12% to close at 4663.30 points.  Unsurprisingly much of the financial media excitedly churned out headlines suggesting stocks were soaring and many commentators focused on the annual rally being the best since 2009.  However if we look past the nonsensical rambling of much of the mainstream media the reality is  that All Ords has in reality simply moved back up to a level below where it finished at the end of 2009 and is still way below the pre-GFC market high.

To pick a stock to write about this time I decided to set some high level criteria, do a search and then see what stock caught my eye. What I searched for was a stock with a market cap of over $100 million, a P/B ratio of less than 1 and a P/E ratio of less than 16. The stock that came out on the top of the list was Suncorp Group Limited.

Finally it seems the Reserve Bank of Australia and Treasury have had to accept that the mining boom has peaked or is peaking, which is something I have been talking about on this site for some years.  However the RBA, Treasury and Gillard Government all still appear to be relatively upbeat about the outlook for the Australian economy next year which is surprising,  since I don’t see a lot to be optimistic about as I review the stock market, housing market or a few other economic indicators.

The Australian stock market closed up again today with the ASX All Ordinaries Index finishing at 4550.90 points – a rise of 0.82% for the day.  The last couple of months have been generally kind to Australian stocks but we need to keep this recent stock market movement in perspective.

Now that the Australian stock market has staged a very modest rally over the last few weeks an assortment of finance writers, brokers & market watchers will begin to speculate if this rally is the start of something big.  Indeed if we focus on the short term the market has done fairly well over the last few weeks, however the longer term trend suggests that the Australian stock market is still stuck in a rut.

The last 5 years have taken their toll on many Australian listed companies whose stocks were once considered almost a must for any respectable balanced shares portfolio. But will some of these stocks regain their former glory and move on to set new highs, or are their best days behind them? Today we will look at three shares which are in the category of former stock market high flyers: Billabong International, Macquarie Group & Perpetual Limted.

As we enter a new financial year it’s a good time to step back and look at some global economic indicators to try and get a grasp on any trends that might be emerging. Are there some signs of economic life out there or any hints of a global economic recovery that might help stock market investors some hope for the second half of 2012?

The last month or so has been quite a ride for Australian stock market investors with the ASX All Ordinaries Index falling from around 4500 points to around 4000 points.  The continuing economic woes in Europe, the economic slowdown in China and the stagnant U.S economy have worked to drag the share market down as have signs that the Australian domestic economy is showing signs of weakness.

Over the last few months it has been quite remarkable to witness how the believers in Ken Henry’s ‘Golden Age’ have started to sound a little downbeat as the economic slowdown in China can no longer be ignored.  Therefore it seems like an appropriate time to try and assess what impact this slowdown is having (and may have) on the Australian economy and review the charts for a few important economic indicators.