The weekly ramblings of an eccentric trader.

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Weekly Ramblings of an Australian Stock Trader – incorporating

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So NOW the Mainstream Likes China’s Economy…

So NOW the Mainstream Likes China’s Economy…

The market makes us laugh sometimes.

The hapless hacks parading as serious analysts and commentators make us laugh too.

We see them all the time on CNBC and Bloomberg TV.

It’s typical mainstream stuff.

It’s all reactionary. There’s nothing proactive about them.

It’s why they always miss the biggest trends. And it’s why they’re in the throes of missing the biggest trend right now…

You should watch the business channels from time to time.

It’s hypnotic.

After a while, you notice that on any given day not that much happens in the financial markets. So once you’ve sat through the half-hour news cycle for the first time, you realise they have to repeat the same news cycle all day long.

That’s what makes it hypnotic. You try to guess the segment, the stock film footage, and which captions are coming up next.

You punch the air in excitement (in your mind) when you correctly remember that the footage of the big dumper truck goes with the story about mining stocks, and the clip of the scientist dropping liquid in a series of test tubes goes with the medical story.

That’s the mainstream. It’s boring. It’s predictable. But for most investors, it’s what they want…because it’s comfortable. [Read more →]

July 28, 2014   Comments Off

What’s Dr Copper Saying?

What’s Dr Copper Saying?

The future of copper excites me.

Copper is one of the best electrical conductors. It’s found in nearly everything — your car, your mobile phone, medical applications, computers…the list goes on.

Because it’s used in many goods, it’s known to be a good forecast for the real world economy. This is why many experts nickname the metal ‘Dr Copper’.

When it comes to copper, China is important. It accounts for about 40% of the world’s copper demand.

And with all the talk that China is slowing down, it’s actually imported more copper in the first half of 2014 than it did last year. And at the same time it’s reducing its exports, China is hoarding copper. You can see this trend in the chart below. The blue box shows 2014 first half imports; the green box shows last year’s.

Source: Reuters
Click to enlarge

This may surprise you. China isn’t actually slowing down. It’s still growing. But its rate of growth is falling as the economy grows larger.

Because China is growing, China has a major copper inventory shortfall. It’s hungry for more copper.

But China is having a difficult time buying copper. The London Metal Exchange is registeringcopper stocks near multi-year lows. Similarly, the Shanghai Metal Exchange, which was climbing earlier this year, is actually down about 56% over the last three months. [Read more →]

July 28, 2014   Comments Off

Are you an Investment Hoarder?

Save, stingy businessman, saving money, man in white shirt with

Do you have a hard time letting go of old junk?

Do you struggle to offload items that have worn out their welcome?

If you’re nodding sheepishly, you’re not alone.

Take me for example.

I’ve waged a life-long battle against my instinct to hoard clutter.

Whether it’s VHS tapes from the 90s, outdated clothes or old school books…you name it, I’ll keep it.

You see, these are all items with which I associate fond memories. Or I just have to retain them for some unknown, but important future purpose.

It could have been much worse. I moved from Melbourne to the United Kingdom, through four apartments in London and then back to Melbourne. That forced me to make tough calls on lots of sentimental objects.

Source: Microsoft
Click to enlarge

Even so, just about every time I see my parents, my mum needles me to throw out one box of ancient souvenirs or another.

Mum’s right to do this. It’s healthy to throw out stuff that’s passed its use-by date. Otherwise, it bogs down your life and people start to worry about you…like the gent pictured above.

It’s just as healthy to take this tack with your investments. Let me explain…

Have a look at your investment portfolio. [

July 25, 2014   Comments Off

The Key to This Stock Market: Invest Like You’re Rich.

The Key to This Stock Market: Invest Like You’re Rich

We told you to watch for the breakout.

Overnight the US S&P 500 closed at a record high.

And yesterday the Australian stock market closed at its highest point since 2008.

That was when the market was on the way down.

But now the market is on the way up.

How much further can it go? Is this the start of a move much higher or is it the final burst before stocks stall and crash?

Here’s how the evidence lines up…

Most of the talk over the past year has been about the bad state of the resources sector.

Smart analysts have said China’s best years are behind it. They’ve said that this will mean bad news for resources stocks.

We wonder how they’ll explain this report from the Financial Times then:

BHP Billiton mined a record amount of iron ore in the 12 months to July, beating its own forecasts, and said production would expand further in 2015 as the company squeezes extra capacity out of its existing infrastructure.

So, let’s get this straight: China’s economy is so bad, and the Aussie resources sector is so hopeless that BHP Billiton [ASX:BHP] mined a record amount of iron ore!

Something doesn’t add up. It can only mean one of two things. Either the market has got it wrong, or the analysts and commentators have got it wrong. We know which one we’d bet on. [Read more →]

July 25, 2014   Comments Off

Why The Australian Stock Market Isn’t In A Bubble.

Why The Australian Stock Market Isn’t In A Bubble

Investing legend Jeremy Grantham says stocks are heading towards a bubble.

He’s talking about US stocks.

He says they’ll reach the bubble stage when they’ve gained another 14%.

We have to say that doesn’t seem like a bubble to us.

Even if you look at where the US stock market has come from. Sure, it has come a long way. But a bubble?


Not yet…

We like to call it ‘bubblemania’.

Just like any other mania, those caught up in bubblemania become obsessed by it.

It’s a craze…an obsession…it’s, well, a mania. They refuse to accept that anything could happen that would cause them to be wrong. They insist the stock market is in a bubble and that it must crash — sooner rather than later.

In our view, the bubble maniacs are just as deluded as the poor souls who think house prices and stock prices can only ever go up.

But if we had to pick sides at the moment…if we had to bet whether the stock maniacs or the bubble maniacs will win the argument over the next five years, we’ll put our money on the stock maniacs any day. [Read more →]

July 24, 2014   Comments Off

Three Things You Need to Know About Investing in China.

Three Things You Need to Know About Investing in China

Before you think about buying into China, there are three things you need to know.

Investing success in China will depend on the advice and insights you get. Perhaps a Chinese connection will set you on the right course. That’s why Kris decided to launch the New Frontier Investor service.

You will get the advice, insight, analysis and research.

So, what can you expect from China and what should you look for before you take the plunge?

An economy in transition

The first thing that you need to keep in mind is that China is an economy in transition. It has grown at an average rate of 10% over the last 30 years. It has achieved industralisation and modernisation at an amazing speed.

China has grown from a poor country to a middle income country. Its economy, finances and military might are a formidable size.

However, there is a catch.

China has grown with a focus on its manufacturing industry and fixed investments. This means it has thrown huge amounts of money at heavy and light industries. This includes energy, steel, machinery, paper and pulp, and other industries.

It’s not hard to understand China’s past growth model.

It’s creating industries at scale. The government initiates favourable policies and fixed investments into basic industries such as steel production. It then allows private money into the system through the banking sector.

This results in a strong positive feedback loop for real wage growth. This powers consumption, which leads to more investment.

Through this process, China has made entire industries out of nothing. It’s important to remember that, from nothing. However, the growth really has been in basic industries, not in services and technology.

Now China is at a crossroads. China will change gear to focus growth on private consumption, services and high value-added products such as technology. [Read more →]

July 24, 2014   Comments Off

Buy Stocks Now Before the Market Rally Begins…

Buy Stocks Now Before the Market Rally Begins…

The drumbeat for a market crash gets louder.

Yesterday’s Australian quotes a report from Australian Foundation Investment Company (AFIC).

It says:

We believe risks are elevated. There is the ongoing reliance on low interest rates to support sentiment and growth and the potential for subdued earnings outcomes.

If there were an award for stating the obvious, AFIC would be the unchallenged winner.

Of course the market is relying on low interest rates. Does anyone seriously think any different? This is how it has been for six years. And if our bet is right, it will be like this for another six years — minimum…

But what’s this?

It seems as though there’s another ‘Captain Obvious’ making an appearance. This time in the Financial Times.

Russ Koesterich, global chief investment strategist at BlackRock writes:

Still, once upon a time, a coup in an emerging market or the threat of a renewal of the cold war would have had investors worried about possible “contagion”. What is different now?

The simple answer is that this is a byproduct of central bank policies. Financial market volatility is mostly driven by the credit cycle. When monetary conditions are loose — meaning credit is both available and cheap — market volatility tends to be lower.

What do you know? We could swear that we’ve been writing about this stuff for at least the past two years. Heck, it has probably been even longer than that.

The difference is that we’ve written it in a way that investors can easily understand. We try to avoid mumbo-jumbo financial whiz kid speak.

But it all amounts to the same thing. Like never before, central banks are working together to keep interest rates low, volatility low…and stock markets as high as possible. [Read more →]

July 23, 2014   Comments Off

How Spindletop Tech Kicked off the Energy Revolution.

How Spindletop Tech Kicked off the Energy Revolution

The 21st century has seen more innovation than ever before.

And the oil and gas industry has been at the forefront of this technological innovation.

New oil and gas discoveries have been found in harsh environments everywhere — the Arctic, ultra-deep waters and even shale. To get it all out, the oil and gas industry has had to become one of the most technologically advanced in the world.

And the need for high powered tech keeps growing. It’s more important than ever to maximise field recovery. Maturing basins and hard to drill frontiers add to this issue.

Sure, oil and gas exploration has always been a high risk game. But at the same time, the reward from success can be huge.

The oil and gas business has never been as profitable as it is now. Globally, it invests over US$1 trillion per year to develop tech that can explore untapped resources.

Because of this tech, exploration risk is the lowest it’s ever been. Success has compounded because of technological innovation.

But new technology didn’t just help the development of the US shale oil story. Tech was what made the energy revolution possible in the first place.

Many thought there was oil at Spindletop Hill, Texas, in the 19th century. However, drillers had to drill through ‘salt’ to get to the oil.  This meant that there were hundreds of feet of sand. Because of this, wells collapsed and hopes fell at Spindletop. .

At least until the Hamill brothers came to Spindletop, along with their state of the art drilling rig. The Hamill brothers had a reputation for being innovative. They helped find the first Texan oil field, which produced 1,450 barrels of oil in 1886.

The Hamill brothers quickly got stuck into drilling. Like previous wells, they soon hit sand. Back then, drillers used water to hold up the well walls. But at Spindletop, the sand was too fine…and water was useless.

The Hamill brothers had to improvise, using only material they had on hand — water, dirt and cows. They struck on the idea of using mud instead of water. And they created it by getting the cattle to stomp around in a nearby water pit.

As the story goes, the mud worked, oil was struck, and Spindletop became the biggest ‘gusher’ that the world has ever seen. [Read more →]

July 23, 2014   Comments Off

Ignore the Noise, This Stock Market Has Further to Run…

Ignore the Noise, This Stock Market Has Further to Run…

‘Stocks are expensive.’

‘Valuations are stretched.’

‘Wall Street is heading for a fall.’

We’ve heard these comments non-stop.

Not just over the past week, but for the past year or more.

Even the US Federal Reserve is blowing hot air about stock values.

And yet, what has happened?

That’s right, stocks have continued to rise. And so far, contrary to what the crash predictors say, stocks continue to justify these so-called high valuations…

One of the big things we heard coming into the US earnings season was that stocks would struggle to match analysts’ estimates.

Well, tell that to the three-quarters of US stocks that have beaten estimates.

As Bloomberg reports:

About 77 percent of the 82 companies in the S&P 500 that have posted results this earnings season beat analysts’ profit projections, and 70 percent exceeded sales estimates… Profit by the gauge’s members increased 6.2 percent in the second quarter, and revenue rose 3.3 percent…

That’s pretty good.

And it’s a good sign when companies can increase revenue and profits. It tells you that companies have some pricing power. [Read more →]

July 22, 2014   Comments Off

Big Data Technology Hits Chinese Financials.

Big Data Technology Hits Chinese Financials

China is the world’s most important market.

However, it’s still behind in many areas of technology.

Big data is one of them…

This is the time of internet finance and banking.

Western markets have succeeded in the area. They made the full change from old-style banking to online banking.

But Chinese banks have only started.

I’m talking about online banking. I’m talking about mobile banking. I’m talking about mobile marketing and ecommerce.

These are huge growth opportunities.

Let’s use mobile banking as an example. There has been a strong push towards mobile banking.

The marketing and sales from all the major banks were strong. All wanted to quickly move their customers onto a mobile banking platform.

In the first quarter of 2014, Chinese mobile banking transactions totalled at AU$924 billion. This was a year-on-year growth of 298%!

Chinese banks have created the basic mobile banking platform. However, there will be more transactions and more functions. This will lead to more storage needs and new services.

Overall, there is still a lot of room for growth in the mobile banking sector in China.

Plus, there are other services developing. They include: Wechat banking, mobile payment and mobile marketing.

These services are the base for future financial applications. Spending in these areas will be even bigger than before. [Read more →]

July 22, 2014   Comments Off