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Market Commentary 2 September 2010
By Lance Spicer, Editor - Trident Confidential Again, it seems the rumours as regards the demise of the global economy have once again been proven to be somewhat exaggerated. The economic engine of the world is still the US and it seems all the worries regarding a "double dip" recession have eased somewhat with a better than expected GDP and consumer sentiment numbers in the last few days. Only the bravest and most pessimistic economists are still expecting a double dip in the US with most now agreeing that while the US economic recovery is slow, it hasn't stalled at all and will improve into 2011. Market Commentary 31st August 2010 By Lance Spicer, Editor Trident Confidential A bubble is forming that many people don’t know about. This bubble will eventually burst as they always do and investors will lose hundreds of millions of dollars (again). The bubble I’m talking about is the Bond Market Bubble. For the last 30 months in a row, inflows into bond mutual funds in the US have been higher than inflows into share funds. The totals are simply ridiculous… US$559 billion has flowed into bond funds in the last 30 months, compared to $233 billion that has been withdrawn from stock funds. This simply means investors are selling stocks and buying bonds, often using managed funds as the vehicle. It seems the stock market’s volatility has worn them out and they want “safety” in bonds. This has caused bonds to be overvalued by a wide margin and stocks undervalued by a wide margin. However, investors perceptions about bond funds are all wrong. You can and will lose money. If interest rates rise by say 2% over the next year, the capital value of a typical bond fund would drop by 20%! This is an investment that people feel is safe, that’s why they are happy with a return that’s currently under 3%. Yet the investors continue to Buy High and will ultimately Sell Low when the Bond Market Bubble bursts in coming months. Right now, bonds have never been more expensive relative to the stock market and the stock market here and in the US is around 25% undervalued on an historical Price to Earnings valuation… and earnings are rising rapidly! What are investors thinking? The stock market presents great value right now despite all the doom and gloom and will in coming months be the focus of bond investors as the bubble bursts. It will only take the “talk” of the first interest rate rise in the US to start the “Sell Bonds – Buy Stocks” scenario. In Less than 6 Months we made 105% on Matrix Composites... well, we have found another outstanding opportunity As an example of what can be found in the stock market if you know where to look is a little company I recommended to subscribers less than 6 months ago. It is Matrix Composites & Engineering (MCE.AX), a leading Australian manufacturer of critical engineered products for the offshore, subsea, mining and defence industries based in Perth. Our investment so far has yielded 105% in just 24 weeks. Well, I have found another overlooked Australian company that I feel has the same price appreciation potential as Matrix Composites, which I have included in this week’s edition of Trident Confidential. This small Australian company has had its share price halved over the last year even though it has returned to strong profitability after a difficult 2009. It’s share price is now equivalent to it’s Net Tangible Asset Value of it’s “hard assets” and therefore a real bargain. However, what makes this buy so compelling is 2 things. 1. An fabulous dividend yield of over 10%pa, which based on the strong turnaround in the company’s businesses will be maintained. 2. In buying the stock at it’s NTA, you are buying the underlying businesses for $0 – nothing. The share price does not include the value of these businesses. Just last week the company announced that they had operating profits from these businesses of nearly $72m and this from a company with market capitalisation of under $300m – Outstanding value! Another factor in Trident Confidential’s decision to invest was the fact that at the CEOs presentation last week, it was made very clear that 2011 would be an even stronger year as July 2010 sales are up substantially on last year. Great news, but news being totally ignored by a very negative market. Our second buy this week, is an American icon. This company has been shocking everyone on Wall St with simply phenomenal results and they have just announced guidance for next quarter that floored everyone. Involved in heavy industry, this US company has made some “game changing” “green” technology breakthroughs that should see the company keep producing stunning results. Superbly managed and well placed to take full advantage of China’s emergence as an economic power as well as leveraging the US economic recovery. A great long-term stock holding. Sometimes the market presents you great opportunities, you just have to have to be able to see through the short term doom and gloom to exploit them. Market Commentary Thursday 19th August 2010 By Lance Spicer, Editor Trident Confidential There’s Good News and Bad News! Last week, I wrote in the Trident Confidential newsletter that you had to be careful about the spin that some commentators and journalists are placing on reports about the economy and the recovery that is currently occurring (or not, depending on your point of view).
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Regards, Rodney and Hildegard D. - 27 August 2010 "G''Day Lance, my name is Stuart B. and I subscribed to Trident Confidential earlier in the year. I am thoroughly enjoying the newsletters and I am slowly working my way through the books I received as part of the Ultimate Wealth Package and has been a wealth of information and greatly expanded my knowledge. Thanks for the great books and providing me with the opportunity to learn about and start my journey to financial independence. Thanks" - Stuart B. - 8 July 2010 "The news letter is the Trident Confidential and the information is in depth well informed and very accurate, our portfolio based on his advice has returned 95% so far for this year." - Review by Richard McKeown. "Thank you for an awesome newsletter" - ME via email (member since July 2006) –17 August 2010 "I have purchased and sold several American stocks according to your recommendations and currently hold five different stocks listed on the American stock market, which are doing very nicely. Keep up the good work and keep the Trident Confidential going. It is great. Regards" - Ted D. 27 July 2010 "Hello, I have funded my account and have been trading over the past few weeks. I am thoroughly enjoying your weekly reports. Thanks very much" - Mark H. 26 July 2010 "I have been away for a few weeks and I lost track of my renewal date and I was so worried that I had missed out on renewing my subscription. I was packing it. I would not have known what I would have done if I had lost my subscription. I saw the email notice and hoped I was not too late. It is great! unreal! the best thing I ever did was taking out that subscription. Thanks very much. Cheers" - P.E. NSW - 19 July 2010 "Hi Lance, Thanks for the great service, a high point of the week, good education. I do appreciate the research. TC is an invaluable service to many. Thanks" - David, NSW 9 July 2010 "Hi Lance, I have been a subscriber to your letter for a number of years now. I have run successfully my own business for 48 years and have accumulated modest assets, however they do not return sufficiently for me to retire and maintain my lifestyle. I am an expert in my business and rely solely on personal referrals and recommendations to get my business. I get great satisfaction from the products I produce and the service that I offer to my customers. The reason for my letter is because you are an expert at what you do, and have given me the chance to retire tomorrow honourably. So I want you to have that satisfaction. Thanks, Warmest regards," - Peter, VIC 8 July 2010
I gave an illustration of how exactly the same information can be spun in a positive or a negative way and how this can greatly affect the attitude and actions of investors. The report I’m talking about here was last week’s US payroll numbers that resulted in a market fall. Version 1. US Unemployment Worsens! Last week, the US payroll report revealed that 131,000 lost their jobs in the US, as unemployment continued to worsen and the unemployment rate hit 9.5%! What’s worse - new private sector jobs fell 28,000 short from expectations, signalling that optimism about a recovery is well overstated. On top of that 143,000 government jobs were cut, in an effort by the US government to bring their deficit under control. Stocks plummet at the open in response. Version 2. US Private Sector Continues to Build Job Growth! Last week’s US payroll reported that industry continued its job growth with a further 71,000 jobs created. This is fabulous news as this is the largest leap in private sector jobs since April. However, jobs did decline during the month by 131,000 but this was due to 143,000 temporary government census jobs finishing as expected. The market expected the unemployment rate to sink to 9.6% this month, but surprisingly remained stable at 9.5%. The market had expected there to be an additional 28,000 private sector jobs created and the market sold off early in response and then rallied all day on the strength of private sector job growth and the fact that the unemployment rate remained stable.
So, as you see, you have to be very careful how you interpret the news and more so, how you act upon it.
Over the last few years, investors have unfortunately been subjected to a lot of negative press that has resulted in them selling their shares at the worst possible time… all due to “spin”. We, as investors have to make sure we use common sense and logic to determine whether news is good, bad or “who cares” before we place any buy or sell orders with our broker. Until we get a grip on our emotions and our willingness to go off half-cocked, investors will continue to annihilate their own financial futures.
Where are we up to now?
The doom and gloom spin media have again convinced us that things are bad and there’s a chance we may again see the world economy slip into recession.
However, we should take a step back and sort through what we know.
Now, consider this.
Do you think the CEO of a company will come out and say he expects sales and earnings to be higher next quarter and higher again next year when he’s not sure? Do you think that when we get to that time period and he’s wrong, that the market and shareholders will be understanding? So, why would a CEO lift guidance if the economy was possibly in trouble?
I can tell you why, and I know from being a Financial Controller of listed companies, they already have sales and margin results for the first month that have not been released to the market (it’s now half way through the quarter).
Also, very few large businesses work without forward orders stretching forward many months. CEO’s are well informed and they “know” what’s happening in their businesses better than anyone else (except maybe the Financial Controller or CFO, who told the CEO in the first place what was happening).
That’s what I have been saying for probably years, ignore the economists, the journalists, the doom and gloom merchants and all those without an informed opinion and listen to the guy who knows exactly what’s going on in his business – the CEO.
We are not investing in the stock market.
We are investing in individual companies or sectors where the consensus of CEO opinions is very good. To invest in the stock market, you buy the index so to speak – you would only do this in a good bull market when the indices are soaring. In a falling or flat line market, as we have right now, we must be precise in our timing and our targets. We must ensure we understand the real economic circumstances and have a grasp of what companies are prospering and invest in those – I think we are doing a pretty good job so far with an almost 40% return in 2010 while markets are still in negative territory.
As I have said for a couple of months now, and I still stand by it, I expect the market to rally in September or October on expectations of yet another good quarter of earnings results – eventually the market will flock towards companies that keep producing the goods – they also just happen to be the companies Trident Confidential invests in.
What’s more, the US market (S&P500) has an average forward PE of 12.3, this is 23% below it’s average of 16 over the last decade. The Australian market is undervalued, but not by the same extent. The US market in particular is in bargain territory, if the earnings estimates are correct, but they are not!
The earnings estimates have been wrong for over a year – they have been underestimated for every single quarter, which means the chances are they are underestimated for the next quarter too. Therefore, this market could be even more undervalued than most people think – that has to cheer you up - doesn’t it?
To make money in this current market.
Follow these rules and you’ll be just fine, regardless of what the market does. This is what I do at Trident Confidential and it has proven to work in all markets – even the bad ones.
Market Commentary Wednesday 28th July 2010 By Lance Spicer, Editor, Trident Confidential I have just finished writing this week's Trident Confidential edition. It's full of good news and good earnings results and a weekly return of 5.75%. Not bad, I thought, seeing the Australian market was up only 1.86% and the US market up 2.49% over the same period. Then I checked back through recent emails and I thought some may be worth addressing this week. Many of them are from very worried people who have been obviously hit pretty hard by the last two or three years and would like my opinion on a few things. Here they are..... "When will this sideways market end?" "My shares are still through the floor, and what's worse my managed funds are no better!" However, you pay a management fee to a professional fund manager to do better than the market average or index. If they can't acheive that, I would redeem my funds and go elsewhere or consider doing some research yourself. Investors in this country have been subjected to underperforming fund managers for years and quite frankly most of them wouldn't know if their backsides were on fire. Move your money elsewhere. Consider some of the better specialist small and emerging companies funds as I feel small caps will do well over the next few years. "I have to say that your returns seem too good to be true!" Well, just as I was writing this article a subscriber sent me an email asking me for some extra information on the subject of the VIX and the Relative Strength Index of the S&P 500 and at the bottom of the email were the following words, "I find your newsletter excellent and if readers cannot make money then they are not following the rules. Warm regards," Simon B. The returns are the returns. We disclose each new buy and sell with prices, and a full portfolio listing each week, we even tell our subscribers how to do the calculations for themselves. There is no smoke and mirrors, how can there be, when all this is disclosed? I have to say there have been some pretty "rough" comments made about Trident Confidential over our returns, so I thought the best way to handle this was to simply state: "If you subscribe and you find our newsletter was misrepresented or our returns aren't real - we will provide you with a full refund!" Read Our Full Honesty or Money Back Guarantee Here
People's superannuation still looks crook and people are genuinely worried theirs will be a frugal and painful retirement. The same applies in the US where consumers are still concerned about spending money. These things take time to heal. I expect 2011 will be an improvement over this year, and 2012 even better. "What shape will Australia be in after the election? Who do you think will be better?" Well, I'm going to refrain from becoming political, but I have made it very clear in my newsletters that I do not favour overtaxing Australia's resource industry to the point where investment capital moves elsewhere. The PM has made some inroads there which are welcome, but the mining industry still has concerns. As an investor. I'm still wary of investing in iron ore or coal at this stage until at least the election is over. Other resources such as those I have recommended in my newsletter seem to be out of "harms way" now. I think whoever gets in, Australia's future will remain closely linked to China's (and Asia's) fortunes and we need to recognise that. What's more, China's fortunes are linked to the "health" of the American consumer. I think 2011 will be a much better year for the US economy and that will flow through to Australia. So, I think the future for Australian equities will be very good, but we need to wait until after the election. Markets don't like uncertainty and that's what we have right now. I'm extending the Guaranteed Return Offer for another week. SPECIAL OFFER - In addition to our Profit Guarantee, join us before midnight Friday 30th July and I'll extend your membership by an extra 2 months! Pay for 12, get 14 months of membership. Quick Facts About Trident Confidential Click Here for the Quick Facts If you have any questions about Trident Confidential and what we can offer you, please give us a call on (02) 9544 5135
Kind Regards Market Commentary Wednesday 21st July 2010 By Lance Spicer, Editor, Trident Confidential One commentator I heard the other day described the stock market as a "meat grinder", I can see his point. If you were just an average investor you would definitely feel that way. After a very rough 2008, and encouraging latter part of 2009 and a very tiresome 2010, investors have every right to feel discouraged. However, many investors, unfortunately, play "victim" at times like these. They make 2 major mistakes. The first thing they do wrong is buy the "wrong stocks". Just because a company was good in 2007, doesn't necessarily mean it's good today. Yes, it might be a big company, and you feel safe with having shares in it, but it keeps going down doesn't it, or at best, won't go up. These days, you have to think a little "outside the square". You have to recognise things have changed in the last 2 years and they may not return to the way they were for a few more years. The Global Financial Crisis changed all the rules and its pointless sitting on the sidelines waiting for things to improve. By the time they do, the opportunity you have, will have passed. The second mistake they make, is they wait for good news. They sit on their hands when the share market slumps, and only jump in and buy when the market is going up. Of course, then it goes down again. Hence, the term "meat grinder". Average investors are buying high, and selling low in a panic when the news "turns" the next day. It's understandable for people to do this. They only want to spend money on shares when they feel good about the decision. However, this is "emotional investing". You feel good when the market's going up, and you get a rush of blood to the head and you think the good news is here to stay - you leap in and buy, often the wrong stocks! This is a mistake. The only way to make money in a "meat grinder" market is to: 1. Only buy stocks when they are cheap and the market is having a bad day. 2. Never chase a stock. Always set strict limits on how much you'll pay. 3. Don't buy a stock based on past "glories". Buy a stock based on what the future holds. Do your research properly and think about the future, not the past. Investing with history as your guide is like driving a car looking through the rear view mirror. Some stocks do go up in markets like these. The average Trident Confidential stock is up over 20% in the last several months. 4. Always have a strict exit strategy that is in place. Don't let small losses turn into big ones - ever! Follow these rules and you'll not only survive the "meat grinder" market - you'll prosper. As Warren Buffett says, "Be greedy when others are fearful, and fearful when others are greedy". Nothing said has ever been more true when it comes to the stock market. The Bottom Line It's possible to make money in any market, if you buy the right stocks at the right time and leave your emotions to one side. To prove it to you, I'd like to make you a Guarantee. I'll show you: - What stocks to buy and when The prices we record in our portfolio, are the same prices you'll pay if you follow our simple rules. It's very simple. All we need is around 30 mins to an hour per week of your time. Of course you'll need some money to invest as well. Many of our subscribers have started with just a few thousand dollars and built up from there. This is not daunting, but it will require a little effort from you and commitment to do something about your financial future. Join Trident Confidential, and I guarantee that I will show you how to make a profit equal to, or greater than double the market's performance over the next year, and if the market is negative, I guarantee that our portfolio won't be. If I fail, for whatever reason, you won't pay another cent until I make good my guarantee. Since we started in 2005 our returns have been 148% in 2005, 74% in 2006, 98% in 2007, 23% in 2008, 113% in 2009 and over 30% this year. So, while past performance is not an indication of future performance, our record isn't too bad. SPECIAL OFFER - In addition to our Profit Guarantee, join us before midnight 31st July and I'll extend your membership by an extra 2 months! Pay for 12, get 14 months of membership. Kind Regards Lance Spicer is qualified and licensed to provide investment advice on Managed Investments, Equities and Derivatives. Trident Investment Management Pty Ltd is an authorised representative (No 339798) of The International Securities and Derivatives Group Pty Limited (ABN 22 103 552 683) holder of Australian Financial Services License (AFSL 227544) I am very thankful for having Lance Spicer as a mentor, he has helped my wealth to grow exponentially" - Tony, Perth WA – October 2009 |
