A RANT

Got caught on the ABC Radio Adelaide this morning. They were talking about the boom in online broking accounts that CommSec are reporting and ASIC is warning about (being conservative is their job). Of course there’s been a boom, everyone’s looking for something to do in isolation plus we are in the middle of a rare once in a decade buying opportunity. Whilst I was on there, the journalist in front of me described private investors trading the stock market in the following terms:

• Gamblers
• Don't know what they are doing
• Lambs to the slaughter
• Pure Luck
• Losers
• Haven't got a chance
• Swimming in shark infested waters
• Day Traders
• Same odds as horse racing
• Not very proficient
• They all buy at the top sell at the bottom
• Dumb

Really? The constant cynicism. He’s obviously never met you lot, or any other successful self-directed investors or retirees, or any Members of the AIA, ASA or ATAA. They say you judge people by your own experience.

Anyway, rant over.

THE HURT LOCKER

At the request of a Member I have updated the tables showing the stocks that have fallen the most from the top. CLICK HERE -  This is a good hunting ground for recovery plays, stocks that have been hurt the most. I’d be scanning through it for ideas.

Our COVID-19 “Hurt Locker” includes (email me with any additions):

SOME STOCK BULLETS

• CBA unlikely to disappoint – There is an AFR article today previewing the CBA quarterly result on Wednesday. Expecting provisions to jump in line with the other banks. It's going too hard for CBA to ‘shock’. All the bad news appears to be out there.
• Macquarie – Results tomorrow. Better be OK. Should be. The CEO is in the press being quite upbeat. Bells downgraded the stock yesterday. Going a bit sideways on the chart as well.

• Education restart – The government are clearly going to do something to kickstart the education industry worth $35bn a year. That may include charter flights and a quarantine protocol for international students. Either way, a good vibe for an education sector recovery if the government are going to try and get involved. IEL the most obvious stock involved.

• ECB Gloom or Boom – The ECB’s forecast for GDP to fall 7.7% this year with 9% unemployment can be taken negatively, or, you can focus on their 2021 GDP forecast of +6.1%.

STRATEGY SUMMARY

• Nothing to disturb the asset allocation today. I’d still be happy playing the theme that we are in the middle of a long term buying opportunity.
• Headlines in Australia are all good for “Restart” – There is a Cabinet meeting tomorrow to discuss a staged return to work by July including social-distancing, safe hygiene, staggering work start times to reduce public transport congestion, two team tic tac toeing for employees. All good for the stock market.
• Going sideways – This is the ASX 200 chart on a daily basis – technically we now look for a break of the trading channel and you are supposed to chase the break in the same direction (buy if it breaks up and sell if it breaks down) – that’s the theory anyway. One newswire described us as having a “Fragile rally”. Not sure it's that fragile but it's not bullet proof.

• Risk of a relapse – This chart shows you that perhaps the US is coming out of lockdowns too early. There are actually a couple of regions in the US that have just recorded record case numbers. If Australia had the US case profile I’m pretty sure Scott Morrison would be telling us we’re not re-starting in the foreseeable future but Trumps saying “people have to go back to their normal lives” and implying that deaths from COVID-19 are a price they will have to pay. I’m not sure we can be confident that the US is going to do the right thing on the right timeframe. I’m sure we’ll be fine, but rather than looking over our shoulder at the chances of a relapse we should be staring straight at the US who show every sign of cocking it up. I’m not going to do anything in the stock market to effect that view, making predictions is not the game, watching the herd is the game and at the moment they aren’t caring. So we won’t either. Just yet.

• Still playing oil sensitive stocks. Long term buying opportunity but not behaving today with the oil price down and IEA inventories predictably up.
• Still playing REITs – But they’re going sideways. No real momentum to the upside yet. May have gone a bit early and tied up capital in a long-term trade when there may be better short-term trades. We’ve only got them in the income SMA as it happens. Beginning to yawn.
• Trade War Irrelevance – Trump says he’ll update us in a week if China is sticking to the Phase-1 trade deal struck in January. He says “China may or may not stick to the trade deal”. I don’t believe that against the backdrop of the current COVID-19 economic numbers (GDP expected to drop as much as 40% in the US in Q2) that the trade war matters. In 2019 it was potentially the pin that burst the sentimental bubble of an over-priced US equity market, but that bubble has already burst, the impact of COVID-19 is infinitely worse and trade war developments are a side issue. So I’m trying to unlearn the programming from 2019 that every trade war headline was important. It's really not. Who cares if GDP is down 40% or 41%.