Patrick Poke

Australian economy grows just 0.2% in Q4 and enters ‘GDP-per-person recession’ as auto sales crash; new study by S&P shows that investors are still being ‘fooled by randomness’, nearly 20 years after Nassim Nicholas Taleb first warned against it; and $US1.3 trillion asset manager, Legal & General, says quarterly earnings and buybacks should end. Here’s what’s happening in markets.

What I’m reading

Car dealers suffering as economic downturn takes hold

As implied by RBA Governor, Phillip Lowe’s speech yesterday (see chart below), the auto industry is feeling the brunt of the weakening economy. Yesterday’s quarterly GDP print came in below expectations at just 0.2%. On a GDP-per-person basis, the economy has now contracted two quarters consecutively.

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S&P survey shows randomness still rules

Nassim Nicholas Taleb warned us in 2001 of the dangers of being “Fooled by Randomness”. But nearly two decades later, investors still suffer from this bias.

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Legal & General: Time to end buybacks and quarterly earnings

One of the world’s largest asset managers, with $US1.3 trillion under management, said it was concerned by the amount of money being spent on buybacks, rather than investing in businesses for the long term.

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Stocks to watch

  • Rate sensitive stocks such as QBE Insurance, Transurban, and the big banks. Yesterday’s lower than expected GDP figures have increased calls for a rate cut from the RBA and driven down bond yields.
  • Dollar sensitive stocks such as BHP, Rio Tinto, and Cochlear. Expectations of lower rates are weighing on the dollar, driving it down by nearly one percent.

Key market data

  • ASX Futures: 6,248.5 (+1.11%)
  • ASX200: 6,245.60 (+0.75%)
  • AUD/USD: 0.7029 (-0.83%)
  • S&P 500: 2,771.45 (-0.65%)
  • China A50:  13,005.02 (+0.34%)
  • Australia 2-yr bond: 1.675 (-3.57%)
  • Australia 10-yr bond: 2.076 (-3.76%)
  • US 2-yr bond: 2.516 (-1.21%)
  • US 10-yr bond: 2.693 (-0.94%)
  • Gold (USD/oz): 1,287.10 (+0.19%)
  • Copper (USD/lb): 2.925 (-0.29%)
  • Brent Oil (USD/bbl): 65.92 (+0.09%)
  • 62% Iron Ore (USD/t): 86.8 (-0.40%)

Upcoming releases and events

  • Retail sales and trade data for January are released today at 11:30am AEST
  • Chinese trade data for February is released tomorrow
  • US housing starts and building permits are released tomorrow at 11:30pm AEST
  • US auto sales for January are released on Monday at 11:30pm AEST.

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Mr T

interesting elasticity curve. if the underlying data is good, then the relative position of things on the curve are a useful way to look at a portfolio and see what you dont want to be exposed to if our economy tanks. (only in australia would alcohol be wealth inelastic!)