Australian Economy Fires Across Mining, Property, and Other Sectors

Australian Economy Fires Across Mining, Property, and Other Sectors

Even though US stocks closed higher again in last night’s session (our time), I’m beginning to think the Aussie market might be due for a pause, if not a little dip.

There’s a lot of good news coming out at the moment. It explains why the market rallied reasonably well over December. The market was moving in advance of the positive press.

Take, for example, the news around mining…

Aussie economy fires across sectors

Advisory firm BDO says in its latest report that the 697 mining juniors on the ASX increased their exploration spending by 16% in the September quarter — the biggest jump since 2014. Mining as a sector is well into an upswing again.

Commodity prices have certainly remained above their consensus estimates. That means the big miners like BHP, Rio and South32 are going to have huge levels of cash to fund dividends or stock buybacks.

This month, we’ve already talked about how a similar forecast is forming for the big banks to do the same thing.

The big miners and big banks dominate the Aussie index. If both of them are on track to spew out more cash than previously factored in, it’s no wonder the market has trended up.

We also have a front-page story in today’s Australian Business Review, stating that Australian LNG exports are soaring. December was a record in terms of volume.

That’s not all…

The Australian also reports that the construction industry is assured of a strong 2018 after both residential and non-residential approvals hit record levels. Loans are also looking strong.

Farmers are riding high too, apparently. Western Australia has seen a strong wheat crop come in, and almond and grape growers are cashing in on positive trends.

Land values across the southern Murray-Darling have doubled since 2014.

All this might make you feel warm and fuzzy.

But the market doesn’t give us any reward just for reading the newspaper. It’s a lot harder than that. Good news is usually long factored in before it makes your daily read.

I’m talking in the short term here. These ARE positive developments as far as the whole year, and general economy, are concerned.

But unless you plan on buying an ETF on the market and holding it come what may, shorter-term cycles count. Just ask any futures trader.

I could be wrong, of course. The market could keep moving up.

That’s why it’s important to have a plan and know if you’re trading short- or long-term moves.

Of course, it’s one thing to have a plan. The other part is actually sticking to it. That’s often harder to do than to say. Trading and investing trigger our emotions.

That makes it hard to stay rational. We’re humans, not automatons. We get scared. We get greedy. We get carried away.

Just look at what’s happening around cryptos and blockchain at the moment


Callum Newman
Editor, The Daily Reckoning Australia