Stocks you should own: AMZN, FB, GOOGL and VZ (For more on VZ, click here.)
Stocks to keep tights stops on: FEYE, NVDA, P, SQ and MBLY. Also a bet on Europe: VGK.
I like this chart:
For the full story, click here.
Australia’s 25-year miracle. Australia just celebrated 25 years of constant economic growth — no recession, no pullbacks.
The Economist explained why and how:
Australia’s economy
Good on you: Australia has weathered the China slowdown and commodities slump well. What has it done right?
THE last time Australia was in recession, Mikhail Gorbachev led the Soviet Union and Donald Trump had filed for Chapter 11 only once. Barring unforeseen catastrophe, late next year Australia will pass the Netherlands’ modern record of 26 years of consecutive growth-despite the slowdown of its biggest trading partner, China. Unlike most of the rich world, it sailed through the global financial crisis, and unlike most commodity exporters, it has weathered the raw-materials price slump. Its GDP growth rate of 3.1% dwarfs that of America and the euro zone.
Australia is often called “the lucky country”, and luck, particularly in geology and geography, has played a part in its success. But it has deftly played both sides of the China boom: the surging demand for raw-material imports while that lasted; more recently, the desire of the Chinese middle-class to eat well, travel and educate their children in English. Yet every silver lining has a cloud. Not only does Australia have one of the most expensive housing markets in the world, it remains overexposed to the fortunes of China.
The story of Australia’s success starts with what its government did not do: spend beyond its means. Tight budgets in the late 1990s and early 2000s, combined with improving terms of trade, meant that when the financial crisis hit, the government was running budget surpluses (though the country as a whole has a long-running current-account deficit). It could thus afford stimulus packages in late 2008 and early 2009 worth more than A$56.6 billion ($42.8 billion). Only China provided greater stimulus as a share of GDP.
Australia was then in the middle of the biggest mining boom in its history, stemming from increased demand in China. In the decade to 2012, the value of its mined exports tripled; mining investment rose from 2% of GDP to 8%. From January 2003 to February 2011 the price of iron ore, which these days comprises 17% of Australia’s exports by value, rose from $13.8 to $187.2 a tonne. Australian thermal coal, which accounts for 12% of its exports, rose from $26.7 to $141.9 (down from a peak in 2008 of $192.9).
The Reserve Bank of Australia (RBA) estimates that, during that period, mining raised real disposable household income by 13% and wages by 6%, boosting domestic purchasing power. Saul Eslake, an independent economist, argues that “except for the Chinese people, no country derived more benefit from the growth and industrialisation of China” than Australia. The value of the Australian dollar also rose, which dented non-mining exports. But since demand from Asia kept prices high for Australia’s agricultural commodities (such as beef and wheat), and because it exports relatively few manufactured goods, the damage was contained.
As China rebalanced and commodity prices tumbled, other exporters such as Russia, South Africa and Brazil fell into recession. In Australia, although business investment has fallen sharply, GDP growth remains near its 25-year average of 3% (and as a side benefit, the commodity-price fall quelled rising inflation).
For that, thank two factors. First, the rise in mining investment during the fat years led to increased production. Commodity exports have continued to grow (albeit modestly and less profitably). Though prices of iron ore and coal are well below the past decade’s peaks, they remain above pre-boom levels.
More important, Australia let the dollar depreciate, which made its exports more appealing. Today Australia benefits from a growing number of Chinese consumers, who buy Australian food products that are widely seen as safer than their home-grown equivalents.
Middle-class Asian students have been flocking for English-language education to Australian universities, which are closer and cheaper than their American and British counterparts. Between June 2015 and June 2016 the number of international students enrolled in Australian colleges and universities rose by 11%, and the number of international visitors rose by 13.7%. Today education and tourism together account for 14% of Australia’s export value. Graduates are eligible to work for up to four years, and some stay longer, giving Australia a relatively young, well-educated, multicultural workforce.
Those workers will need places to live, which has helped increase house construction. According to Paul Bloxham, the chief Australia and New Zealand economist at HSBC, Australian builders completed almost 200,000 new dwellings last year, and will probably do the same this year and next. Construction has absorbed some of the employment losses as mining investment has waned (building a mine requires more people than running one).
Yet that has failed to stop an alarming rise in house prices, particularly on Australia’s east coast. In 2015 the median house price in Sydney was 12.2 times the median income, up from 9.8 in 2014. Melbourne’s multiple rose from 8.7 to 9.7 in that period. Some argue that house prices have peaked, and that as residential construction continues prices will moderate (except perhaps in central Sydney). But if prices collapse, that could not just harm Australia’s otherwise healthy banks, but also dampen domestic consumption for years.
Some argue that government debt, which has hit a record 36.8% of GDP, up from a low of 9.7% in 2007, is another worry, because it provides less policy room to deal with the next crisis. It remains lower than in most developed countries. But given the risks of a housing bust or deeper slowdown in China, such worries reflect a healthy lack of complacency. After all, one day the luck will run out.
Apple’s new stuff.
If you have a modern iPhone, nothing Apple introed yesterday will make you rush to the Apple store and place an order.
Today is not like the old days.
The new is not a better phone. It won’t improve your phone calls one iota.
It will take better pictures. And your pictures will look better. The iPhone cameras (especially on the Plus) are now equal to Nikon/Canon/Sony cameras costing hundreds of dollars.
After the cameras, there’s a bunch of minor improvements — like being waterproof (but not smash proof), having stereo speakers, slightly longer battery life and new black colors (that will make the iPhone easy to lose and easy to scratch).
There are new cordless (pricey) headphones, which may sound a bit better than the cordless Bluetooth ones available today.
In short, this is the Apple of Tim Cook, a brilliant operations guy. But not a brilliant innovator like Steve.
By the end of the day, Apple stock was up 68 cents, or about 0.63%.
I don’t see Apple as The Great Growth Stock of The Western World, despite its huge cash hoard (which it doesn’t know what to do with).
Yesterday in Apple:
Maintenance.
+ Squirt WD-40 into your locks.
+ Tighten the screws on your glasses.
+ Use Guardsman on your leather chairs — before the leather dries and cracks.
+ Back up your day-to-day working files onto a flash drive. Maybe two flash drives.
+ Read Packing Tips from an Airport Baggage Handler. Click here.
+ Don’t do stupid. Exercise is good. But don’t overdo it. Don’t be like my friend, who overdid it, and is going in for surgery this morning on his meniscus. And feels very stupid!
+ You should probably take 1000 IUs of vitamin D3 every day.
Walls don’t work?
Heck, the Chinese built one 2,000 years ago. And they haven’t had one illegal Mexican immigrant since!
The wall does have benefits:
Two more puns:
+ You can tune a piano, but you can’t tuna fish.
+ To write with a broken pencil is pointless.
Harry Newton who watched yesterday’s Apple Show on his iPhone 6. Worked perfectly. The self-congratulatory epithets were a little hard to take. There was huge applause for the most minor of improvements — like new colors for the iPhone. Who cares? But Apple does — especially if it has nothing seriously new and innovative to show.
The U.S. Tennis Open continues. Murray is out, destroyed by Nishikori, who is playing out of his mind. Tennis is a running game. But you can lose it in your own tiny brain, as Murray did. The finals are this weekend. ESPN and ESPN2. You can probably see re-runs on The Tennis Channel.