Fizzle in Retail, but Sizzle Here (Plus Bonus Content) |
Wednesday, 29 May 2024 | By Callum Newman | Editor, Small-Cap Systems and Australian Small-Cap Investigator |
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[3 min read] In this Issue: Retailers sinking My new report Either you decide what to do with your time and money...or someone else decides for you. |
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Dear Reader, Can you hear that wheezing, fizzling, choking noise? That’s the ASX’s retail sector deflating. Yesterday the automotive firm Peter Warren came out with their latest update. The shares sank 13%. What did they say? Revenue is up, but margins are down. Costs are up too. Full year profit is likely to be down 20% against market expectations. The cost of living takes another victim. Why am I bringing this to your attention? Some context is important here… It was only back in February I wrote a piece in the Fat Tail Daily called ‘Revenge of the Retailers’. It was how retail shares were ripping up in January. Indeed they were. One reason was that many were releasing better results than the market expected at that time. In January investors became optimistic about multiple rate cuts helping retail firms later in the year. Those rate cuts look off the table now. We may get one, but not many. Retailers now confront consumers with little wage growth, high costs and not much sympathy from the RBA. Look at the response from the share market over the last month: JB Hi Fi -4.82% Beacon Lighting -16.6% Temple & Webster -11% Myer -10% Peter Warren Automotive -17% KMD Brands -17% I’m sure you get the point. Now, it’s likely a long-term opportunity is forming here, for counter cyclical investors. A retail sector sell down will throw up some interesting value propositions if you’re prepared to buy and hold for years. However, that requires considerable patience and fortitude…and even then, it may all be for nothing if you back the wrong horse(s). Point being retail stocks are unlikely to take off anytime soon. That begs the question… Where can we go looking some ‘heat’ in the market? As you can probably tell, I’m a big believer in momentum. The best way to find potential profits is to focus on the sector already providing that. Just as the retail sector has come off the boil, a new one rises to take its place. Perhaps you’ve already guessed: Yep, mining shares! Certain gold stocks, in particular, look very juicy right now. The gold price is well over US$2,000 per ounce. This is giving gold producers very good margins (unlike retailers). Investors are now willing to back development and exploration firms when they need cash to fund their ongoing operations. We also have the prospect of industry mergers and acquisitions. There is also big money that could wash over Australia from North America. You see… The gold price in Aussie dollars has been strong for many years now…thanks to the weak exchange rate with the USD. For American investors, it’s only recently that gold has really busted out. Naturally, this has kept US gold firms suppressed. Now they look to have the wind at their back. And they’ll go shopping in a Tier 1 jurisdiction like Australia. We also know the US government deficit can’t be sustained from taxes alone. That means the Fed must juice the markets with more liquidity at some point soon. History says gold will respond to monetary inflation (or currency debasement, if you prefer). And while no one knows what’ll happen next… It’s all shaping up to form a multiyear bull run in gold and gold shares. How to benefit from gold’s coming bull market The beauty of the gold sector is that there are multiple ways to play this. You can buy bullion or coins directly. You can consider gold producers, or developers or pure explorers. You can buy large, mid, small and microcap companies. You’re spoilt for choice. You can pick and choose the risks you’re prepared to run, if you decide to do so. Perhaps that’s the real challenge. There’s just too much choice within the gold sector to know where to start. Mining shares are also quite complicated because of their unique geology, metallurgy and processing. My strong suggestion is to follow my colleagues James Cooper or Brian Chu…that both specialise in mining and gold respectively. Mining shares could be shaping up for a huge growth run. That’s why I sat down with another two men with vast experience in the mining equity space: Robin and Hedley Widdup. They are the father-son team behind Lion Selection Group. Lion is an $80 million fund that specialises in junior resources. We had a great chat recently about all things mining. You can see it on our YouTube channel for free by clicking on this link. Enjoy! Best, Callum Newman, Editor, Small-Cap Systems and Australian Small-Cap Investigator Callum Newman is a real student of the markets. He’s been studying, writing about, and investing for more than 15 years. Between 2014 and 2016, he was mentored by the preeminent economist and author Phillip J Anderson. In 2015, he created The Newman Show Podcast, tapping into his network of contacts, including investing legend Jim Rogers, plus best-selling authors Jim Rickards, George Friedman, and Richard Maybury. He also launched Money Morning Trader, the popular service profiling the hottest stocks on the ASX each trading day. Today, he helms the ultra-fast-paced stock trading service Small-Cap Systems and small-cap advisory Australian Small-Cap Investigator. | By Bill Bonner | Editor, Fat Tail Daily |
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[3 min read] Dear Reader, Sad to report, but a ‘new spirit of cooperation’ has descended on Washington... like a toxic smog. Are they cooperating to lower the deficit... balance the budget, bring the troops home and bring the debt under control? Are they coming together to cut off US support for the bloodshed in the Ukraine and Gaza...? Are they rallying to a common cause... of peace and prosperity? Really, dear reader... you disappoint us. Of course, they’re not. They’ve come together, like a pair of desperadoes, making plans to rob a bank — the bank where you keep your money. Yes, Republicans and Democrats... blue and red... are joining forces to make things worse for all of us. David Leonhardt at The New York Times: ‘A New Centrism Is Rising in Washington ‘Call it neopopulism: a bipartisan attitude that mistrusts the free-market ethos instead of embracing it. ‘In a country that is supposed to have a gridlocked federal government, the past four years are hard to explain. These years have been arguably the most productive period of Washington bipartisanship in decades. ‘During the Covid pandemic, Democrats and Republicans in Congress came together to pass emergency responses. Under President Biden, bipartisan majorities have passed major laws on infrastructure and semiconductor chips, as well as laws on veterans’ health, gun violence, the Postal Service, the aviation system, same-sex marriage, anti-Asian hate crimes and the electoral process. On trade, the Biden administration has kept some of the Trump administration’s signature policies and even expanded them. ‘The trend has continued over the past month, first with the passage of a bipartisan bill to aid Ukraine and other allies and to force a sale of TikTok by its Chinese owner.’ ‘The new centrism’ is a fraud. Republicans and Democrats have been conspiring to rip off the public for decades. Lately, they’ve gotten bolder. Poor Leonhardt thinks the two parties collaborate to create a better society... one in which same sex marriage is de rigueur and anti-Asian hate crimes are taboo. But these social norms have nothing to do with capitalism. You can wear your underwear on your head; capitalism doesn’t care. ‘Capitalism’ just describes the infinitely complex and always evolving ways people work together to get what they want. It’s what’s left after the feds interfere. It doesn’t care who you marry or who you hate. Up to you. Leonhardt rejoices that we now have a Congress that ‘gets things done.’ But the more it does, the less room is left for capitalism to do what it does — produce the goods and services that people actually want. And there is the real problem. It is an error of commission, not omission. In 1930, the government spent only 4% of GDP. Now, the Federales take 24%. The states take another 12%. And add in the part of the GDP controlled, directed, or subverted by federal and state regulation, and the total easily tops 50%. Capitalism still does what it always does. But it has much less room to do it than it used to. The fault lies in too much cooperation between Republicans and Democrats -- too many laws... too much spending... too much regulation, too many sanctions, too many wars and too much debt. One of the parties should have been a stick in the mud, quietly resisting... urging caution... preaching humility... and voting ‘no.’ Instead, both vote for more power and wealth for themselves and their friends. Call it what you want, but this has nothing to do with a new, improved form of capitalism. At the end of the day, it all comes down to a simple question: who decides? Either you decide what to do with your time and money... or someone else decides for you. And when others decide, the money tends to go in their direction, not yours. The facts are well known. So far this year, the feds have received $3 trillion in tax revenues. Theoretically, as a voter, you have some say in it. But as a practical matter, what you want hardly matters. But wait, it’s worse. This fiscal year the feds have already spent almost $4 trillion. And the deficit grows with every one of these vote-buying giveaways that Leonhardt regards as signifying “the most productive period... in decades.” What’s really going on? The politicians buy votes; you pay for them. At the current rate, the nation is headed for a debt crisis, a depression and a period of sustained inflation — things you probably don’t want, but will be imposed on you by bi-partisan consensus. Dear Readers know all about it already. They are prepared — with gold buried in their backyards... and up-to-date passports in their back pockets. No need to go on. But the more the parties work together... the worse it gets. Gridlock is far better. Regards, Bill Bonner, For Fat Tail Daily All advice is general advice and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment. |
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