What the Pyramid Builders Saw 5,000 Years Ago

Grate pyramids in Giza valley in Egypt with group of bedouins on camels riding through desert
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This is my penultimate day at the helm of The Daily Reckoning, dear reader. I’ll save the reminiscing and tears for tomorrow. But, just in case you take off somewhere between now and then, make sure you sign up to Money Morning, which is where you will be able to find me from next year.

Like The Daily Reckoning, it’s a free, daily newsletter. So come on over and join me and co-editor Sam Volkering as we point out the numerous opportunities the market will offer in 2017.

To follow me at Money Morning, you can simply click here. We’ll take care of the rest. I hope to see you over at Money Morning in the new year.

As you probably know, I write an investment letter called Crisis & Opportunity. Writing in The Daily Reckoning, I tend to focus on the ‘crisis’ part. In Money Morning, my aim is to focus on the ‘opportunity’.

And there will be plenty of opportunities next year. Yesterday, the ASX 200 closed at its highest level since August 2015. That’s a bullish sign, and it suggests further gains are in store for 2017.

The conditions are right for it. The dollar is getting weaker, and the RBA looks like leaving rates untouched for some time. Earnings growth won’t be spectacular, but global growth appears to be picking up, which should benefit stocks with offshore earnings.

And after a few years in the doldrums, the banking sector is again doing well. Below is a chart of the financials index, which is dominated by the Big Four banks.

As you can see, the sector’s share-price surge is a big reason why the Aussie market has done so well over the past month or so.


Source: Optuma
[Click to enlarge]

The rally has much to do with the optimism surrounding banks in general, following Trump’s election victory and the promise to reduce banking regulations. That sparked a major rally in US banking stocks, as you can see in the chart of the Philadelphia Bank Index, below.


Source: Optuma
[Click to enlarge]

This index is now at its highest level since 2008. My guess is that Aussie stocks are rallying on the back of this, on a ‘relative valuation’ argument.

It also suggests that the Aussie housing market isn’t going to collapse anytime soon. Bank earnings might not do too much in the next few years, but, as long as they can maintain dividends, share prices will be well supported.

Even after the recent rally, banking bellwether Commonwealth Bank [ASX:CBA] still sports a prospective dividend of more than 5% for 2017. With official interest rates stuck in a rut at 1.5%, that’s an attractive yield.

After such a strong run, I would expect a bit of profit-taking to surface soon. But a correction is not a crash, and I would expect any correction to be a buying opportunity.

And that’s my point. There will, of course, be lots of volatility next year, but I’m not seeing any evidence of a crisis brewing. So 2017 will be the year of opportunity.

There are a few stocks that I follow as ‘crisis barometers’, and, at this point, none of them are flashing red, or orange for that matter.

Having said that, nothing flashes red at the top. It’s all ‘blue skies’ and ‘no clouds in sight’. But the market will always give you clues of approaching storms if you know how to listen to its message.

Which is another point I want to make. Learning how to listen to the market’s message is much more important than listening to your own message — or to someone else’s message that happens to agree with you.

This is something that I’ve consciously done with my advisory, Crisis & Opportunity, over the past few years. I now care much less what I think, and much more what the market thinks.

Doing this alerts you to opportunities that you wouldn’t ordinarily see, because your dumb, biased brain (or my dumb, biased brain, at least) is too busy focusing on, or worrying about, something useless.

And I can tell you that this approach works. After tallying up the returns from all the stocks still in the portfolio, as well as the stocks sold during 2016, the average gain across all Crisis & Opportunity recommendations was around 28%.

Who would’ve thought embracing ignorance could be so profitable? If what you’re doing isn’t working for you, come and give my newsletter a try. Make 2017 the year of doing something different. Click here to check it out.

Now for something different…

Did you notice that yesterday was the Summer solstice? That’s when the arc of the sun reaches its highest point in the sky in the Southern Hemisphere. Put another way, it’s when the sun moves directly above the Tropic of Capricorn.

Everywhere south of the equator gets more than 12 hours of sunlight; everywhere north of the equator gets less than 12 hours of sunlight. Yesterday, for example, Melbourne saw 14 hours, 47 minutes and 22 seconds of daylight.

The sun will hover at this point for three days, and then start making its way back north. Put more accurately, the Earth will start tilting the other way. The days will slowly, but surely, start getting shorter again.

This movement of the heavens has been going on for millions of years. The sun regulates everything. Light regulates everything. The builders of the pyramids knew it nearly 5,000 years ago, as did the architects of Stonehenge and countless other societies that erected ancient monuments to light and time.

In 5,000 years, we’ve clearly made a lot of material progress. But it seems like we’ve lost touch, and respect, for nature. If anything built today is still around in 5,000 years, I’d be very surprised.

That our ancestors could build monuments to last through the ages tells me they saw something very profound in the movement of the heavens. These days, we’re largely blind to it. Our minds are closed to the possibilities. We’re materially richer, but spiritually poorer for it.

More on this tomorrow…

Regards,

Greg Canavan,
For The Daily Reckoning

PS: Our colleague Callum Newman recently interviewed former News Corporation and Fairfax journalist Michael West.

You can hear the interview on Callum’s podcast, The Newman Show. As Callum told me, West talks about how newspapers are dead, business journalism is a joke in Australia, and no one takes on big end of town.

It’s sure to be an interesting episode.

To subscribe via iTunes, go here.

To subscribe via Stitcher, go here.

Greg Canavan
Greg Canavan is a contributing Editor of The Daily Reckoning and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails. For more on Greg go here.
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