Blog

Tue, 03 Jan 2017  |  

You can teach an old dog new tricks, or at least an old dog with an open mind, some understanding of markets and a desire to make money.

As an investment, I think gold has no fundamental underpinnings. I have written about my dislike of the shiny dirt as a means of investment and there are many reasons why I reckon it is still a dog. Here is my take on gold from a few years ago https://thekouk.com/blog/gold-price-falls-revisiting-gold-as-an-investment.html 

That said, even dirty dogs can get cheap and present a trading opportunity.

And so it appears with gold.

Mon, 02 Jan 2017  |  

I am not sure if Andrew Roberts, the RBS markets guru who famously kicked off 2016 with a recommendation to clients to “sell everything” still has a job, but anyone who followed his prognostication would have lost a lot of money. An aweful lot.

At the time Roberts’ started grabbing global attention with his extraordinary, ill founded, irrational and illogical forecast, I offered him some ‘skin in the game’ in the form of a A$10,000 bet that he would be wrong - that many of the markets he identified as a "sell" were in fact a "buy". The link to that offer is here https://thekouk.com/blog/sell-everything-my-challenge-to-andrew-roberts-of-rbs.html 

As noted previously, it was a very generous offer on my part – Roberts only had to have the price of 6 of the 11 categories offered to fall to win – ie, not ‘everything’.

Suffice to say, Roberts did not return my email, which is a pity. That $10,000 would have been handy beer and HSP money for 2017.

Anyway, to the facts.

Sun, 01 Jan 2017  |  

It’s that time of the year – making the calls for the year ahead for the economy and financial markets.

Key themes:
Ongoing sluggish growth in Australia with house prices set to weaken markedly, possibly fall. US (and most global) stock markets to fall, perhaps quite sharply. US dollar to weaken, Euro to rise strongly, linked to a reversal to the current market over reaction to US politics. The moves have been irrational. RBA to cut interest rates, bond yields to have only a limited sell off.

Without further ado, here are the Top 10 on the economy and markets, plus a couple on sport and horse racing.

Sat, 31 Dec 2016  |  

At the start of 2016, I posted my Top 11 tips for 2016. It has been a mixed bag with a couple of issues of timing and of course changes of view through the year taking their toll. Suffice to say, it was a borderline pass for the sum of all forecasts.

Outlined below are those 11 forecasts with my comments on their success of otherwise in brackets, in bold. Included is my self-rating out of 10 for each forecast.

1. Real GDP growth in Australia will accelerate to around 3.25 per cent, driven by strong exports, solid growth in household spending, a further lift in dwelling construction and a meaty contribution from public sector demand. Business investment will remain horribly weak, but even that might find a base during the course of the year. There seems precious little chance that GDP growth will slip below 2 per cent at any stage in 2016. [Well, against almost all expectations, annual GDP growth spiked to 3.3 per cent in the June quarter, before sling to 1.8 per cent in the September quarter. What looked a great forecast around September, ended the year looking not so hot. I jumped onto the slower growth band wagon around mid year when there were cleans signs of growth stagnation. My self rating is 6 out of 10]

Tue, 27 Dec 2016  |  

This is the podcast of my chat, along with Eliza Owen, Property Market Analyst with Corelogic and Mark, someone looking to buy their first house on ABC Radio National.

Listen in - I reckon it was a good discussion.

https://www.abc.net.au/radionational/programs/breakfast/digging-deep-into-the-housing-debate/8149112 

Wed, 21 Dec 2016  |  

This article first appeared on the Yahoo 7 Finance at this link: https://au.finance.yahoo.com/news/aussie-economy-faces-significant-downside-risks-in-early-2017-005824675.html 

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Aussie economy faces significant downside risks in early 2017

2016 is coming to an end with the economy muddling through - at best. Indeed, as the year has progressed, things have got worse across a broad range of indicators which suggest there are some significant downside risks into the early part of 2017.

Importantly, GDP growth was negative in the September quarter and annual growth slipped to a tepid 1.8 per cent which is a rate of growth rarely recorded in Australia. It’s bad news. At the same time, the unemployment rate has been stuck near 5.75 per cent having threatened to break lower earlier in the year. Any jobs that are being generated are overwhelmingly part-time which is a further signal that all is not well with the economy. It is simply not growing fast enough.

The most recent data also show a further weakening in wages growth, to a record low in fact, which is putting pressure on household budgets and dampening new consumer spending. In simple terms, it is difficult for households to build spending when wages growth is barely keeping up with inflation.

Tue, 20 Dec 2016  |  

This article first appeared on The Guardian website at this link: https://www.theguardian.com/business/2016/dec/19/coalitions-policy-ineptitude-exposed-as-myefo-points-to-multiple-credit-downgrades 

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Coalition's policy ineptitude exposed as Myefo points to multiple credit downgrades

When Joe Hockey, as treasurer, delivered the Coalition’s first budget in May 2014, he framed the government’s policy agenda around budget deficits of $10.6bn in 2016-17 and just $2.8bn in 2017-18. The budget was to swing into surplus in 2018-19 and every year beyond that.

With two-and-a-half years of Liberal–National party economic policy settings since that Hockey budget, today’s treasurer, Scott Morrison, has outlined the results of that plan, plus the impact of new policies and economic changes in today’s midyear economic and fiscal outlook (Myefo). Morrison has confirmed that the current projections are for budget deficits of $36.5bn in 2016-17 and $28.7bn in 2017-18, meaning the 2017-18 deficit alone is some six times larger than projected by Hockey.

The Hockey framework meant that Australia’s sovereign triple-A credit rating was assured with all three major ratings agencies noting the fiscal trajectory and underpinnings of solid economic growth as reasons for this favourable assessment. Helping also was the projection that net government debt would peak at low level of 14.6% of GDP under the Hockey 2014 budget scenario.

Alas, the strategy outlined in 2014 is in tatters.

Mon, 19 Dec 2016  |  

Last week, I had a terrific chat with Paul Colgan and David Scutt, my good friends at Business Insider. It was a terrific conversation with the team who produce insightful and useful commentary and analysis on the Australian economy and financial markets.

The pod cast of our conversation is at this link: https://www.businessinsider.com.au/podcast-devils-and-details-with-stephen-koukoulas-on-gdp-and-how-the-rbs-call-to-sell-everything-worked-out-2016-12 

It runs for about 45 minutes and covers a lot of issues about the economy, markets and where to in 2017. Listen in.

Thu, 15 Dec 2016  |  

It really is the silly season.

The government is thinking that it might be able to fix the budget deficit problem by abolishing $100 notes. Sure, this is an exaggeration, but it is at least looking into the issues of cracking down of the cash economy and crime with the humble $100 note in its sites. The inference is that the $100 notes facilitates crime and boosts the cash economy.

There are a couple of points to note.

The $100 note was introduced in 1984 and since then, the consumer price index has risen by 200.5 per cent. The purchasing power of the first $100 note has dropped to around $33.30 in today's dollar terms. $100 just doesn’t buy as much as it did 1984.

If bank note issuance was to broadly track inflation, the government is behind the curve in issuing a $200 note. Even a $300 note.

Mon, 12 Dec 2016  |  

Government debt is currently a little over $463 billion, which is up around $190 billion in the three and a bit years since the Coaltion won the September 2013 election. The pace at which government debt is rising is faster now than during the stimulus measures during the GFC. And this is with Treasurer Morrison trying to hike taxes and cut spending in his quest for a budget surplus. 

At current levels, governemnt debt is already at a record high and based on reasonable projections, it is set to exceed half a trillion dollars during 2017. The Mid Year Economic and Fiscal Outlook due next week will confirm this. It is also likely to confirm that debt will approach three-quarters of a trillion dollars around 2022 if it is honest with its projections.

THE LATEST FROM THE KOUK

The Australian stock market is a global dog.

Sat, 24 Jun 2017

This article first appeared on the Yahoo7 web page at this link: https://au.finance.yahoo.com/news/1381246-234254873.html 

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The Australian stock market is a global dog.

At a time when stock markets in the big, industrialised countries are zooming to record high after record high, the ASX200 index is going no where. So poor has the performance been that the ASX is around 20 per cent below the level prevailing in 2008.

It is a picture most evident in the last few years. Since the middle of 2013, the ASX 200 has risen by just 10 per cent. The US stock market, by contrast, has risen by 50 per cent, in Germany the rise has been 55 per cent, in Canada the rise has been 20 per cent, in Japan the rise has been 45 per cent while in the UK, with all its troubles, the rise has been 15 per cent.

So what has gone wrong?

Tony Abbott and debt

Fri, 16 Jun 2017

With Tony Abbott and governemnt debt hot news topics at the moment, I thought I would repost this artricle which I wrote in April 2013:

Enjoy, SK

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Here’s a true story. It’s about a man called Tony.

Tony is a hard working Aussie, doing his best to provide for his family. He has a good job, but such is the nature of his work that his income is subject to unpredictable, sharp and sudden changes.

Tony’s much loved and wonderful children go to a private school and wow, those fees that he choses to pay are high. He used to have a moderate mortgage, especially given he was doing well with an income well over $200,000 per annum.

Then things on the income side turned sour.

Tony had a change in work status that resulted in his annual income dropping by around $90,000 – a big loss in anyone’s language.

How did Tony respond to this 40 per cent drop in income?

Well, rather than selling the house and moving into smaller, more affordable premises, or taking his children out of the private school system and saving tens of thousands of after tax dollars, Tony called up his friendly mortgage provider and refinanced his mortgage.

In other words, Tony took on a huge chunk of extra debt so that he could maintain his family’s lifestyle. No belt tightening, no attempt to live within his means, just more debt.