Aussie Economy in Turmoil

Last year, i was contemplating on opening a AUD fixed deposit, but interest rates were dropping, AUD/USD rate was also peaking. Thank GOD i didnt. Recent events have peaked my interest again in the Aussie Dollar though.

AUD/USD fell to its lowest level in more than 2 years, home-loans are slowing down and it does not look like a safe-haven currency anymore as their interest rate advantage narrows. It has taken surprisingly long for this correction to happen. I believe this is because of speculation around the US Feds announcement that it will reduce stimulus this year.

The only things going for Australia were demand for its Housing and Commodity (mainly from China). This even helped Australia escape a big economic bust in 2008, however things are looking bad now. China is slowing down definitely but still growing at a slower pace...and i hate using the terms "hard or soft landing". 

Australia's labour costs are ridiculously high, their housing bubble has BURST and their commercial real estate can only go down from here. SO have a look at the Real Home Price Index Chart over a period of more than 100years. Aussie housing market has been truly sitting in a bubble waiting to burst. At the risk of sounding like Alessio Rastani, yes i do dream of recession, make things cheaper for the average investor like me.

     

Petrobasiliero (PBR)

I must admit temptations are hard to resist. Sometimes you have to stop yourself from making silly mistakes. PBR has been on my radar for the past 3 years and there has been times when i almost executed an order to buy it at $40 then at $30. At the back of my mind, someone keeps telling me to speculate on beaten down stocks. But luckily i have my brother who is far better at technical analysis than me, who keeps pointing out the obvious flaws...And you know what, i appreciate 2nd opinion on these things. Looking a the shorter time frame from 2008, i realise that PBR is a $60 - $70 stock trading at such a discount. It is the official, government owned oil company in Brazil, heavily invested in Ethanol production and supply. It enjoys an economic advantage (moat) over other players in the South American region with large number of assets on and offshore.

 BUT the real question is:

Why has it not performed as well as ExxonMobil, Shell or Chevron? What is wrong with it? 
My best guess is: POOR MANAGEMENT or in this case too much Micro Management and Interference from corrupted government officials.

Lets look at long term trend (technically speaking):

Even the long term support is no longer valid. Technically there is just nothing positive, except that previously the bottom in 2009 was around $14 region and just this year crossed the bearish trend down from 2008 peak. I wonder if NOW this stock has actually started to trend upwards. 

Fundamentally its rubbish, Technically is somewhat unpredictable at this point. Buying PBR would not be investment, it would be a gamble, which i must stop myself from doing.

But in all seriousness, the lesson to be learnt here is that; Dont speculate, research on the background of the company, look at their financial data, if they are losing money for some unknown reason, stay out of it. If the company doesnt make money, shareholders get NOTHING too. Technical analysis is great for making decisions clearer, always rely on technicals before executing any order.

 

First REIT pullback

Been watching REITs closely for some time now. The recent pullback in REITs has me more interested for 2 reasons:
-Their still relatively high yields
-Healthy correction driven mostly by FEAR

Of particular interest is First REIT because of the fact that i like the business sector they are in: Hospitals/Nursing Homes in Indonesia/Singapore/Korea. They have shown themselves to be aggressive in expansion and since 2009, their stock price have gone up significantly from 30cents a piece to almost 1.44 at its recent peak.

At the moment, the counter is undergoing a retracement to 23.6% on the Fibo chart, testing levels on $1.17 so i am happy to see this an another opportunity to get into this again. But i would wait until 50% retracement from its peak to $0.99. Am i being too ambitious? According to the chart though, a 50% retracement correlates with the major supporting uptrend for the past 4 years. Something to note here: we are seeing low volumes being traded.

I regretted selling FirstREIT prematurely at $1.04 but was happy to clock in almost 30% profit last year. Maybe this pullback is going to be a good chance for other people who have been sitting in the sidelines.

Most of the REITs are displaying similar behaviour, I just feel there has been some profit taking from retail investors and institutional investors alike, the general market trend still Bullish. Its not over till the fat lady sings. At the moment though, just sit back and wait till markets stabilise before going in again. Here is Keppel REIT analysis below which is similar retracement but general trend still upwards:

Note: High volume traded recently suggest there might not be much reversal for Keppel REIT. But the bottom uptrend line is still intact. Currently resistance turned support line @ 1.40 is being tested. Wait and see if this breaks down.

Disclaimer: We have not reached a market peak yet but dont take my word for it. Do your own research before making any investment decision. We could as well be experiencing the beginning of a downward trend.