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30 October 2019 Good morning everyone, There is a lot happening, and stocks could suffer a momentary short term set back. This would again be an excellent investment opportunity for the long term, as the overall dominate big picture risk remains significant upward price acceleration. We should be aware though, that the US Federal Reserve expected rate cut this week, may not be the sure thing many think it to be. In any case, such a further, and I must say completely pointless rate cut, is already fully priced into the stock market. At the same time, it is not correct to say US stocks have hit all time records, because of rate cuts already seen and expectations. The truth is that the US economy is reasonably strong and could well re-accelerate after the eventual coming together of a US China trade deal. Such a deal, even preliminary, is still some way off. It will not happen at the forthcoming meeting in Chile, but we should not be expecting something concrete quite so soon. It will happen though, and this is the key point that will increasingly dominate investor sentiment moving forward. It is really the possibility, though slim, that the Fed may not cut rates, and that such a reduction is already priced in that we should be mindful of on the day. As for impeachment risk. This remains zero in reality. The Republicans will not vote for it. So it simply will not happen. In fact the polarisation of the US voting public as a result of the process could actually work to Trump’s favour in next year’s election. The other news, of course, is that the UK will be going to the polls on December 12th. The conservatives are likely to be returned with an increased majority. There will be swings toward the new opportunist Brexit party, as well as the anti-Brexit groups. Nonetheless, with their first past the post electoral system, it is the Conservatives who look to be well ahead. This could be one election, where the polls are providing the correct overall outcome. The end result, is that Brexit will happen according to the latest deal by January 31st. This will mean a massive relief, where consumers and businesses alike can get back to living their lives and engaging in enterprise without this great uncertainty cloud hanging over them. Australia saw a turnaround in the property market and across the economy generally post the federal election here. This was exactly as I forecast, because it is a very common and repetitive pattern that most people seem to miss. Which means of course, it tends to be one of the more reliable patterns in economic outcomes. Now, when we apply this approach to the UK situation, we can only expect a more profound and quite startling re-acceleration of the UK economy, and some aspects of Europe too, post the December 12 election date. Then, again further acceleration, post the actual event of Brexit. There may be a one month waiting or cautious period by business, but from there, catch up investment will begin to flow quite quickly. Like the bursting of a dam. Expect a very strong surge in the UK economy in 2020. The above analysis has been the backbone of my bullish Sterling outlook, and also why the sell-downs of global equity markets, because of Brexit, have been entirely mis-guided. Value investment creation has been the result, and we should all be taking advantage of this. The overall outlook for markets remains one of buying any-and-all dips. Recognising, also, that long term sharp upward acceleration periods are very likely for global equity markets in coming months and throughout 2020. The Dow Jones target for next year, set in 2012, remains 30,000. Regards, Clifford Bennett
Good morning, the transcript suggests the Biden issue was a very small fragment of the call, and confirms there was no suggestion of holding anything back based on the issue. Though there was certainly an enquiry, perhaps distasteful, but not a crime. It also confirmed, that Ukraine was already investigating the issue of Biden influence regarding the original prosecutor. There are no grounds for impeachment, as there was no crime. Department of Justice officials in the agency's criminal division concluded that the call did not constitute a crime. This is going to backfire big time on the Democrats over coming months. There are no grounds for impeachment and the process would not succeed in any case, because of the Senate. Time to buy stocks again. Though there will be some negative headline spin, when the full complaint by an internal staff member is released on Friday. This should only be momentary. We waited until Wednesday, this week, as the headline storms have been quite volatile. W are about 'getting it right'. That's what is important. Have a great week. Regards, Clifford
BREAKING NEWS: Q2 GDP 0.5% for the quarter 1.4% over the year Today’s Q2 GDP numbers highlight the long term structural problems now embedded in the economy: Exports are strengthening substantially, but the Australian economy still languished at 0.5% for the quarter, and 1.4% over the year. 1. The overall GDP data masks even deeper issues and problems in the domestic economy. Strong exports, due to our trading partners, Asia, rest of the world doing relatively well overall, masks the fact that the domestic economy has been badly under-performing for some time now. The core problems are the ceaseless expansion of regulation, compliance and tax complexity burdens on small and large businesses alike.The loss of productivity is approaching a tipping point for the nation as a whole. 2. Calls for further rate cuts on this data are mis-placed. It was alway expected that the first half of 2019 would see a significant slowdown, primarily due to uncertainty and caution ahead of the federal election. We are already seeing significant improvement in property values. Key though in deterring rate cut expectations, is that since the first half of the year we have seen election uncertainty removed, significant tax reform, and most likely un-necessary rate cuts that will further fuel what would already have been a significant economic recovery in this second half of the year. Q2 was likely the low point for Australian GDP in this cycle, and any knee-jerk response by policy makers such as the RBA would be a mistake. Nonetheless, the long term loss of productivity due to extreme compliance and regulatory requirements now endemic throughout the economy, will likely see Australia continue to fall further and further behind the rest of the world. The Q2 data highlights the urgent need for truely bold economic reform. The impact for markets will only be one of relief. Both the Australian dollar and stocks are well below their true fundamental levels due to the recent exaggerated fears over the impact on Australia of the US China trade war. Exporters should be hedging their currency exposures well forward at this point. Investors should be buying stocks, particularly those with an International exposure. Clifford Bennett
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