Callum: ‘I Quit!’
That’s what I told my publisher when he arrived at the office at 7:27 this morning.
He didn’t look shocked.
Truth is, it was an inside joke.
We’ve actually been planning my departure for quite some time.
And today, I officially give my two week notice to you, dear reader.
In precisely two weeks, you will no longer see me in these daily missives.
Maybe that will make some of you happy.
I hope even more of you will JOIN me, though.
See, for the last few months, we’ve been planning a new and exciting venture.
A venture that involves you, if you want to come with me.
Don’t worry, this venture requires no payment.
It’s 100% free.
It’s actually been in the offing for months.
I’ve been working on the preparations.
And now, finally, they’ve come to fruition.
Tomorrow, you’ll be able to join me.
In the meantime, I’m taking over The Daily Reckoning Australia until Monday 8 October when the new venture begins.
Like I say, more details tomorrow!
Now, on with today’s show
The world is obsessed with Chinese/US relations right now, and rightly so.
But you’d better keep an eye on the old stager Japan, too.
That’s especially true if you happen to be in one of three things: the coal business, the Australian government or the Aussie stock market.
Two of Japan’s largest companies are now saying they’re going to pivot their businesses towards renewable energy in a major way.
They’re also now only interested in the highest-quality coal going into the most modern and efficient plants.
When those two companies are Japan’s largest bank and a major Japanese conglomerate with equity in six Australian coal mines, that gets my attention.
And it should get yours too.
Coal stocks: not for the Family Trust, or retirement plans
I suggested last Friday that the fossil fuel industry was on track to find itself completely cut-off from bank lending.
This is more evidence of this trend.
The irony of the coal business right now is that the Aussie dollar price for coal is so high when the world is turning away from the industry.
Coal stocks are making money now, but they’re not the kind of investment to put aside for your kids, or theirs.
The risk of climate change legislation in the longer-term is just too high.
This dynamic brings the Australian government into the picture.
The coal business is a major export and pays out a lot of royalties and tax receipts into the coffers at both state and federal level.
Those are looking very healthy right now. Last week, the rating agency Standard & Poor’s reaffirmed Australia’s Triple A rating and upgraded the budget outlook to ‘stable’.
This is largely thanks to healthy commodity prices.
Cue the predictable response.
Australia’s freshly minted Prime Minister might just decide that a little extra spending is not too bad anymore!
The previous guidance from the federal government was that fresh funding could only come from savings elsewhere. We’ll see on that.
But a boost to government spending sets the backdrop for the Aussie economy to keep ticking over for another year, at least.
Don’t forget, too, that the Victorian state election is in November, and the one for New South Wales is in March next year.
Those in power will be juicing up the promises and commitments.
That means I’m not inclined to worry about Australia falling into a recession anytime soon, nor the USA, as it happens.
For all the fuss about the tariffs, it pays to look at the actual figures.
I saw these in The Australian over the weekend.
US consumer spending totals over US$13 trillion a year. Trump’s tariffs (so far) are a 10% charge on US$200 billion of Chinese imports — or 1.9% of the US shopping bill, according to Adam Creighton.
It’s hardly the stuff of the Great Depression.
That sentiment appears to be reflected in copper and zinc lifting last week. Both commodities have been sold down hard as sentiment turned nasty towards trade.
We can say the same thing about Chinese stocks.
As such, there’s an opportunity brewing here.
Time to investigate Chinese tech
Now, I want you to pause for a moment and reflect on one thing. I did the same on Saturday night with an old mate over Korean BBQ chicken and a couple of cold ones.
Two of America’s premier stocks — Amazon.com, Inc. [NASDAQ:AMZN] and Apple Inc. [NASDAQ:AAPL] — are trading around US$1 trillion in market capitalisation.
It’s going to be hard for them to get a serious lift in value from here.
That means it’s highly likely fund managers will go looking for the huge growth tech companies can provide, but at lower valuations.
Where might they find such companies?
I think it’s highly likely they’ll turn their eyes to China.
The growth rate of these firms is astonishing, and they still have so much runway in front of them.
There was a story in August that few picked up on.
One of Canada’s major pension funds came out and said it was going to invest up to 20% of its assets into China over the next seven years.
They’re unlikely to act alone.
This trade war ‘air pocket’ looks a great entry point to a long-term growth story.
Trump can thrust and parry from America’s borders, but he can’t ward off the hundreds of millions of consumers in Asia and Africa that the Chinese state and major firms are courting.
This is in an example of how you can turn current events — today’s ‘trade war’ — to your advantage.
It’s also how I like to focus my attention on opportunities in the market.
And on that note.
Remember: Big announcement coming tomorrow!
OK, lean in.
At the start of today’s issue I officially announced my imminent departure from the DR.
Tomorrow, I’ll officially announce where I’m going to, and how you can join me.
Like I said, it involves a new, exciting, potentially profitable and perhaps best of all FREE venture.
But why would you even want to join me on this venture?
Well, as you may have gathered if you’re a regular reader of The Daily Reckoning Australia, my views on the markets are quite different from that of my colleagues, Shae Russell and Jim Rickards.
While they look at big macro themes and events to decipher the direction of the markets. I tend to take a more opportunistic approach.
If you’re someone who likes to look beyond the gloom and doom and straight for the OPPORTUNITY in any given situation.
Then you’ll love what I’ve got prepared for you tomorrow.