Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Tuesday, 25 October 2016

Fire it up! (Shorts burned again)

Pretty good effort

Lots of talk and misinformation on my Twitter feed and elsewhere about immigration directly causing 'falling' wealth in Australia, when in fact real GDP per capita is at record highs. 

Talk about spin, S. K. Warne would be proud of that one!  

All things considered, Australia's real GDP growth performed remarkably well through the global financial crisis, so I'm not really sure why people are trying to claim otherwise (what am I saying? Of course I am). 


It's true that national income did take a bit of a hit after an extraordinarily strong 17-year run. 

Income boost

And yet, some of Australia's key commodity prices have lately been staging a monumental fightback, and real national income looks like a nailed on certainty to surge to new record highs at some point over the next few quarters.

Dalian iron futures hit "limit up" today, up +6 per cent (follow the links to Business Insider for more details). The spot price rose +4.9 per cent to US$61.60/dry ton.

Fortescue Metals Group (FMG) saw its share price rocket another +6.5 per cent higher, touching a fresh 52-week high of $5.46.

FMG's share price is now up by a lazy +280 per cent since its horrible January nadir (imagine if you'd been shorting that!). 


Not to be outdone, Dalian coking coal futures were also limit up +7 per cent to another new high.

Coal prices really have exploded dramatically in recent months.

Whitehaven Coal (WHC) closed up by +5 per cent in the end the trade at $3.14. Indeed, WHC is getting tantalisingly close to being a tenbagger from its desperate lows of just 35 cents in February!


Windfall

Across the first three months of 2016-17 Australia's budget deficit was already tracking favourably versus budget forecast to the tune of $1.9 billion. 

Meanwhile, these commodity price numbers suggest that a very tidy windfall may be heading the way of Treasurer Morrison in due course - and potentially a huge windfall if prevailing coal prices persist for any meaningful length of time. 

Amazing news for ScoMo. Better to be lucky than smart, as they say!

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Otherwise, a quiet day for news. Stay tuned for tomorrow, though, as the all-important inflation figures are due for release!