Turnbull’s Lucky Windfall

Turnbull’s Lucky Windfall

You won’t need to worry too much about Turkey for the time being.

US stocks closed up in overnight trade.

The market’s judgement is clear: The bull market continues.

We can draw a similar conclusion for Australia. Despite the headlines, the S&P/ASX 200 still looks strong.

We can thank thermal coal for a good part of that.

Commodities across the board are taking a hit right now.

But shareholders in Whitehaven Coal Ltd [ASX:WHC] probably can’t believe their luck. Thermal coal is at its highest Australian dollar price since July 2008.

Demand from Asia for power generation is driving this even as European use declines. And nobody wants to invest in coal anymore many banks won’t even consider financing projects.

The Australian reported in April that the Treasury was anticipating a thermal coal price of US$85 in its estimates of company tax receipts.

Currently it’s just over US$120. If it continues to stay high, it’s going to pour more money into government coffers.

That could conceivably give Prime Minister Malcolm Turnbull more ammunition to prop up his position through infrastructure spending in key electorates.

That’s one reason I don’t buy into a real estate collapse scenario.

Here in Melbourne, a Brighton shop just sold for $3.2 million above its reserve.

But that look likes chump change compared to the $100 million a Chinese developer has paid for an apple orchard in Melbourne’s Wantirna South.

One wonders how the coal-producing regions of Australia are shaping up in terms of property. There must be plenty of money around.

In any case, the current bull market in coal also reveals that there’s always opportunity in the share market, even when the overall index doesn’t do much or the outlook doesn’t appear particularly bullish.

I happen to think the current drawdown in commodities like oil and copper represents a buying opportunity. And I’m not alone.

The Australian Financial Review reported yesterday that specialist resource investment firm Terra Capital is looking to raise $300–$400 million to help fund its spending plans.

It’s not as if the massive Asian market is going anywhere. That places Australia in good stead in the coming years.

A new chapter

The world and markets present opportunities all the time.

That’s one reason I’m going to hand over the full Daily Reckoning Australia editorship to my good friend and colleague Shae Russell.

In turn, I’ll be starting a new daily newsletter, which I’ll be able to reveal over the next few weeks.

We celebrate a diversity of ideas here at Agora Financial Australia.

Shae and Daily Reckoning Australia contributor Jim Rickards do brilliant work for their subscribers over at Strategic Intelligence Australia.

But the difference in Shae and Jim’s worldview and strategy compared to mine is probably a bridge too far for us to share the same platform each week. Not least because the battle lines separating the market optimists and pessimists are more pronounced than ever.

Jim takes the view that the world is in deep trouble and investors should seek shelter in gold and focus on preserving capital.

I happen to think the world is shaping up wonderfully well for a great decade of wealth-creating opportunities. Of course, there’ll be bumps and dips and bear markets. But the overall trend is massively up.

In giving each side its own platform from which to dissect the day-to-day rumblings in the market, we think you’ll be better served in readings about the things that interest you.

Of course, if you’re interested in getting both sides of the story, you’ll still be able to do just that. I’ll let you know how you can subscribe to my brand-new free daily newsletter in the coming weeks.

An investor’s paradise

What makes me so sure that the decade ahead will be so full of opportunities?

Well, it’s basically been that way since the time of the American Revolution.

I’m reading a book on the history of energy at the moment.

I can tell you that working in a British coal mine in the 19th century was not a place anyone deserved to be.

It was roasting hot, cramped, dark, and the whole time you were at risk of the air exploding or suffocating from toxic gas.

For your troubles, you then went home half-starved knowing the next day would be exactly the same until your body was spent.

Eventually, Britons went from burning wood logs in huts and stripping the forests bare to cruising the world in jetliners with air conditioning and entertainment. All because of technological and scientific breakthroughs conjured up by the most brilliants minds of the day.

Why anyone would think the genius of human intervention will slow down now — with millions of Chinese and Indians joining the conversation, as well as the advances of artificial intelligence — is a mystery to me.

I read yesterday that Google’s Deep Mind division has an AI algorithm that shows early promise of diagnosing major eye disease better than doctors.

Even better for us as investors, it’s becoming so easy to access different markets to tap into these kinds of trends.

When Investment Biker author Jim Rogers wanted to invest in emerging markets 30 years ago, he often had to fly to the country, get permission, and set up bank and broking accounts. Now you can do it all from your laptop with one account, often for under $10 a trade.

Let’s take advantage of the times we’re living in.

More to follow.


Callum Newman Signature

Callum Newman,
Editor, The Daily Reckoning Australia