Latest / ausbiz a.m / 02.09.26 with David Bird, Mastering the Markets
Transcript
- Andrew: Good morning and welcome to your morning wrap from Ospiz. It is Wednesday, September the second, and we are expecting a deeply negative opening on the local market. ASEX futures pointing down 0.9%. In a moment, we'll preview the day ahead with David Byrd. First, though, a quick wrap of where global markets finished overnight. Inflation and escalating hostilities in the Middle East have seen oil and bond yields spike higher, with US launching new strikes on a David Bird: Thank you. Thank you. Andrew: Yield on the long bond there at 30 year in the US, around 5.25%. On Wall Street, the Nasdaq finished 1% lower. The SP Dow and Dow both down around three-quarters of a percent, stocks specifically. Apple was up 2.5%. Dell surged 9% in extended trade after lifting its annual revenue outlook. And Tesla fell close to 3%. Among the commodities, Brent Crude surging more than 4% to close to $95 a barrel. Gold dropped David Bird: Thank you. Thank Andrew: ⁓ to around four thousand three hundred and seventy five dollars an ounce, Bitcoins ⁓ down to about ⁓ seventy seven and a half thousand, and the Aussie close to seventy one point four US cents. Well joining us now to get across the market moves, David Byrd from Mastering the Markets. David, good morning. David Bird: Thank More in the next video. Andrew: Very well. So another negative session, obviously a as as I said, both ⁓ inflation and also those ⁓ Middle East hostilities weighing on market sentiment. David Bird: Hey Yeah, definitely. And when the bond yields spike and energy spikes as well, the market user doesn't like those two things together. So yeah, lot of our growth stocks will probably take a bit of a hit today. Andrew: So let's start with oil then, David. What what are you seeing there? Because ⁓ obviously we're as far away as any point in this conflict from a resolution. David Bird: Yeah. So at the beginning of the year, everyone had oil going much, much, much lower than it broke out and absolutely blew up and went up to about $120. Then everyone was very bullish on oil and they're very scared of the effects that it might have on the economy as it flowed through the inflation. However, it did top around that March area. And then we've had a major retracement and it came back to around those high 60s. And it was funny the sentiment, how quickly it shifted in only two or three months, it went from, ⁓ my word, Oil was going to $200, $300 to, ⁓ that's it. It's forgotten about the wall is going to be close to over and we have nothing to worry about. I think people didn't realize is that during that period, all the countries around the world really drew on their reserves. Okay. So now we have a supply and demand crunch because you've not only got the day-to-day use that we all use, but you've also got all the countries having to stock up their reserves again. So now you're getting more, more demand from it. From there, it's actually now changed market structure back to a bullish trend again. So oil is now back in an uptrend, which I think has shocked a lot of people. I personally believe oil has only just begun a secular bull market. I think we're to take out those $120 highs in the next couple of years. And I think you will see a $200 to $300 ⁓ oil price, which seems ludicrous. But if you go back to the last time in the 2000, 2010 period, We had a six to 10 X on oil during those periods as well. So I guess if oil does go and if gas ends up staying bullish as well, how can we get exposure on the ASX? And we obviously have our large producers like Woodside and Santos. Woodside is still 50 % down from its highs back in the GFC in 2008. And if you had said to anyone in 2008, Woodside's about to put in a major top and it won't see a a high for the next 20 years, you pretty much get laughed out of the room because that thing went from $2 to $60 over the last 20 years. So guess the question we have to ask ourselves is, is Woodside a bad company or was it just the macro environment that Woodside existed in for the last 20 years? So we've been in a expansionary phase, a growth environment where we've had low interest rate environment. When money's cheap, people have their money out working for them. Andrew: Mm-hmm. David Bird: I believe we're getting a major turn in that point that we're actually going to be moving now into a more high inflation environment. This is something that the yields are screaming now as well. A lot of people are shocked with all these interest rate rises, but if you study the US 10 year chart, you can look at a hundred years of data and see they run on a 40 year trend. So they bottomed in 1940, they peaked in 1980, 40 years later, they bottomed again in 2021. So. It's these big major cycles that play out these 40 years cycles. And this is where people get trapped because they believe what made them money in the last 10 years will make them money in the next 10 years, not realizing that the macro environment is such a major influence on what stocks perform in certain environments. So Woodside, I believe it's down in the accumulation phase. People haven't switched onto the fact that this thing is bullish yet. And that's what happens in those early phases. Andrew: Mm. David Bird: If it can ever get above that $40 level, that's where people will have no choice but to turn bullish on it. And Santos, our second largest one, same thing. It's actually just broken out this week. So it broke through that $8.10 this week and it's coming back and testing those old sellers as buyers now. You can see that we've sold Santos at that eight to eight 12 range for years and years and years. It's now broken out last week and retesting. So Santos is looking very, very good. And if you're looking a bit more on the speculative end, a bit of a smaller cap down at the billion dollar range, our beach, beaches down around the 80 cents right now. And it's down on a major support showing some signs of life as well. So maybe as the trade starts to come, we might start, money might start flowing down the risk curve towards that kind of thing there as well. Andrew: Right. So, David, ⁓ goodness, that's ⁓ that oil forecast is quite stunning that you've just made then. ⁓ and and look, ⁓ obviously it has significant flow on effects, ⁓ if that were to take effect, but you also mentioned the combination of those rising bond yields, the prospect of high interest rates. ⁓ what then of those interest rate sensitive stocks, how are they going to perform, do you think? David Bird: Ha ha ha! Hmm. Yeah, the AU10 year broke out two weeks ago as well. We're actually back to the same point we were last time they paused. So if it does keep going a little bit more, there's a very, very high chance that we have an interest rate hike again next time. So then you've got to think, well, if money keeps getting more expensive, what stocks on the ASX will get affected by that? And that's where, yeah, obviously the tech, the XRJ index will will likely get affected a bit. that's probably going to be quite red today. ⁓ But it's not just happening in Australia. It's now happening over in America. And again, the theme was at the end of last year, wait for the rate cuts, wait for the rate cuts. And then now it's looking likely the other way that actually wait for the rate rise. ⁓ So yeah, always think when money's cheap, interest rates are low. People want their money working for them. So they'll go in those growth names. But when money is not cheap, when it's more expensive, then that's where people rotate into defensive sectors, hard assets. They want to protect their wealth. So I always say it's very much like sport. In sport, there's times when you want to be on the offense, when you want to attack and you want to score the points. But what's more important as well is once you've got the lead, you've got to retain the lead. So you don't want to make all that money and then give all those profits back. So defense is just as important offense. You need to know when there's times to attack and when there's time to defend as well. and I believe we're in a period of defense right now. Andrew: ⁓ so I'm am I right in thinking perhaps you're ⁓ underweight tick and overweight some of these resource stocks? David Bird: I have zero exposure in tech and I have done since the end of last year. And yes, I'm very heavy commodities, energy, consumer staples, utilities, healthcare. They're my major five right now in my portfolio. So if you look at the healthcare sector, it's just put in a major bottom after being in a six, seven year bear market. The consumer staples, same thing. It was in a bear market for the last six years as well. The XIJ, the Infotech index, it's been in ⁓ a bull market since 2003. So like I said, nothing goes up forever. There's periods where it will go up and periods where it will go down. The one I'm most bullish on is the XEJ, which is the Energy Index. It's been in a bear market since 2008 for nearly 20 years. And again, sectors can't go down forever. The Energy Index is not bearish because There's bad companies in there. It's bearish because of the macro environment that it has existed in for the last 20 years. But that has changed through the land cycle, commodity cycle, interest rates rising. ⁓ Everyone believes that property is turning down now because of what the government did. I posted about this at the end of last year saying the government would do what it has to do, not what it wants to do. Canada didn't change its immigration policy back in 2022 because it wanted to. it did it because it had to, and that had an effect on the real estate property. And we're having that same thing now. If the government didn't step in, then prices would have got out of reach and then we would have been in a lot worse state than we are right now. Andrew: So, David, let's ⁓ then refocus on ⁓ commodities. In particular, the two key export commodities we're seeing ⁓ in Australia at the moment. Well, aside from gold, I guess, but ⁓ both ⁓ copper and iron ore. Now we've seen how well BHP and Rio have benefited from copper exposure, whereas obviously Fortescue doesn't have that and it's ⁓ it's suffered largely. What are you seeing? David Bird: Hmm. So iron ore could have put in a major low just Friday last week. So it, got down and what I love to see, and this is something that CSL did when, when it bonded, when something gaps down, it should keep going because it should be horrific and the trend should just keep going down. But what I like to see is when something gaps down, it pauses. And in particular, what I love to see is then it gaps up. That's what's called an island reversal. It's exactly what the silver miners and gold miners did a month ago when they put in a bottom. And it's what iron ore has just done. So it gaps down from 90, I think it was a hundred down to 96, stay down there for a few days. And then it gapped up and there is now up around the 99 range right now. So FMG, iron ore could have put in a bottom FMG we know is the pure play the largest. producer we have on the ASX pays a great dividend. It's down at a very key technical level now as well. It just went Xdivi yesterday. So it actually sold off yesterday and people are wondering what did it sell off when iron ore just dapped up because it went Xdivi. It paid you a nice dividend. But if you adjust that chart for dividends, you actually see it actually ended in the green yesterday. So even though it was red because of the dividend that you got, or that you will get, you had to have it from that day. It actually stayed positive. So I'd be keeping a close eye on FMG here. I believe there's a good chance it's put in a major low. And then what's exciting is if iron ore does start the bottom here and go up, then our friends at BHP, Rio, et cetera, they've been going very, very well because of copper. But that's only half their exposure. The other half is iron ore. If that part of the portfolio could start catching up. then we might start to get that next leg in our large miners as well. So some exciting times if, if now can show, I want to see it hold the kind of $98 level. If we can hold that and then take out the $100 level, then yeah, there's a good chance that iron ore may have put in a low here. Andrew: Mm. Well, exciting for Iron Or, ⁓ potentially scary for oil. ⁓ David, great to get across those technical views you've got. Thanks for joining us. Have a great day. And that is yours Biz Morning Rap. Hope you have a great day. I'm Andrew Gagan. Thanks for listening. David Bird: ⁓ Yeah. Thank you.