Giving the Bipolar Stock Market a Wide Berth…

Being bipolar isn’t a problem until things get volatile. The stock market is both. Worse still, the drug that’s supposed to be reducing volatility, Quantitative Easing, is slowly being withdrawn. That means the extremes could continue. Or get worse.

But all that’s a bit abstract if you’re just trying to figure out how to fund your retirement. Your reality is much more direct. One day stocks are down 2%, the next they’re back up. Across three days they’re down 3%, over two months and two years they’re flat.

And now we’re back to the good old 5100 level in the ASX200. ‘Good old’ because we first reached it back in 2006. And it’s been fluctuating around this level ever since. So the long term story is that your retirement is in no-man’s land.  Your money is not going anywhere fast.

Meanwhile, your stockbroker, financial advisor and accountant are probably doing OK.

If you’ve had enough of shares, we don’t blame you. But a low, falling and volatile stock market can actually be beneficial to some investment strategies. We’ve been focusing on them in The Money for Life Letter. Two involve income and picking up shares on the cheap at the same time. Also, we’ve made sure subscribers are ‘crash-proof’ with the strategy you can discover here. The timing might be rather good given how stocks are misbehaving.

It’s a bit awkward avoiding straight up stock tips when you’re surrounded by newsletters which focus on them. But it’s the alternative strategies that are set to perform. Put it this way: we’re not game on investing in a bipolar stock market.

The US market’s overnight fall was blamed on a slightly disappointing jobs report offsetting good services sector data. Oddly enough, Bloomberg kept the same quote summing up the situation today that they had in yesterday’s overnight report:

‘”There’s uncertainty around the economic outlook,” Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said in a phone interview. “People had a lot of confidence coming into this year that the economy was accelerating, and the recent set of economic statistics have thrown that into question.“‘

For the benefit of Walter, we’d like to point out that the economy’s health was always in question. Even zombies on life support look perfectly alive to an economist. To anyone with an imagination, they’re still zombies on life support.

As we mentioned above, that life support is waning. The Federal Reserve will pare back its stimulus. At least that’s what the market seems to think. The economic data isn’t bad enough for more stimulus…yet.

But let’s be honest. Even if the data does get bad, the Fed will be there to save the day. So the worst case scenario isn’t really that bad – if you believe the Fed will be able to rescue the economy and financial markets. That’s a dangerous assumption, which is why we’re implementing alternative investment ideas for our subscribers. For example, you can get by on your existing income a lot better if you cut your cost of living – something easy to do outside of Australia. That’s why we explored the merits of overseas travel in our latest issue.

While you’re still here in Australia, it’s the gas industry that’s set to save us…from marijuana. Bloomberg has the details on how:

Leaning on the wheel of his patrol boat, Myti Wood points to the multibillion-dollar natural gas plant emerging on the shores of Darwin’s harbor in the far north of Australia.

‘”I never thought I’d have a chance to help build something like this,” says Wood, 23, an indigenous Australian whose mother’s death was related to alcohol abuse. “I used to smoke marijuana and be pretty heavy on the grog, because I didn’t have anything else to do.”

Three years ago, Wood scraped by on A$100 ($88) a week from the government. Now he’s paid A$2,000 by Workboats Northern Australia, a contractor for the $34 billion Inpex Corp (1605).-led Ichthys liquefied natural gas project, under a program managed by Aboriginal elders. More than half the company’s Darwin-based workforce of 70 is indigenous, up from 27 percent two years ago.

Now that’s welfare, preventative healthcare, economics and anti-discrimination, all capitalism style.

Not so capitalistic is the High Court’s ruling on credit card fees. It established a precedent that late penalty fees are unlawful because they are disproportionate to the cost actually incurred by the bank. Customers can claim compensation as far back as they like, with estimates for ANZ at a potential $57 million. That’s on top of their $70 million refund to borrowers because of a ‘glitch’ on rates paid to mortgage offset accounts.

As always, the banks didn’t come up empty handed. Honour, dishonour, non-payment and over-limit fees were ruled to not be penalties and therefore not subject to the ruling. But the market obviously doesn’t like the outlook for the big four regardless. The big four banks’ stocks are all breaching their 200 day moving averages, which is a danger sign for technical traders. And anyone hoping to sell their shares to pay for their retirement. Better to take care of the problem before it appears.


Nick Hubble+
for Markets and Money


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Having gained degrees in Finance, Economics and Law from the prestigious Bond University, Nick completed an internship at probably the most famous investment bank in the world, where he discovered what the financial world was really like.

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