Speaker 1: Right here, we are seven and a half minutes past
Speaker 1: the hour. Let's get to our guest. It's Grady Wolf,
Speaker 1: market analyst at Bell Direct, to take a look at
Speaker 1: the markets. You know, I've been saying this morning that
Speaker 1: investors are kind of throwing in the towel on a
Speaker 1: central bank pivot here. Uh, And I'm not sure that
Speaker 1: that's a fact. It seems like that's what's happening. We've
Speaker 1: seen a lot of losses here of late, but of
Speaker 1: course investors would also be trying to figure out with
Speaker 1: tenter so losses in these big benchmarks, whether or not
Speaker 1: enough has been discounted. Your thoughts on that. Absolutely. At
Speaker 1: the moment, we're seeing investors shifting their strategic positions and
Speaker 1: what their outlook is for investing moving forward. We're seeing
Speaker 1: a lot of investors throw, as you say, throwing in
Speaker 1: the towel on growth stocks at the moment. The pandemic
Speaker 1: favorites with the likes of after Pace says it was
Speaker 1: zip on our pay later and technology stocks are being
Speaker 1: absolutely slammed this year and for good reason. At the moment,
Speaker 1: these kind of stocks are they're relying on increased fundings
Speaker 1: and borrowings with the cost of funding so high at
Speaker 1: the moment, the cost of borrowing so high, and very
Speaker 1: minimal outlook for these companies in low value at the
Speaker 1: moment until they're in that mature stage of foundation. We
Speaker 1: can't see any outlook or value at the moment either,
Speaker 1: So investors are definitely piling out of those docks in
Speaker 1: favor of the safe havens like the banks, which we're
Speaker 1: expecting high profits from this quarter. UM without out later
Speaker 1: in the week. Yeah, let's talk a little bit about that.
Speaker 1: JP Morgan City, Morgan Stanley all out this week. What
Speaker 1: sort of quarter are you anticipating? There were expect as
Speaker 1: we said, we're expecting higher profits and higher revenues for
Speaker 1: these for the banks, but we're also expecting to see
Speaker 1: increased provisions for doubtful debts around the world because a
Speaker 1: lot of consumers around the world and Australians investors overseas
Speaker 1: UM did take out big loans and we know the
Speaker 1: banks make their margins from a high short term lending
Speaker 1: and long term borrow sorry, short term borrowing, long term lending,
Speaker 1: so that's how to make their margins. But we're expecting
Speaker 1: higher provisions for doubtful debts as we know investors have
Speaker 1: locked in. These consumers have locked in their unaffordable debts, well,
Speaker 1: debts they thought they could afford during the pandemic when
Speaker 1: the rates were record lows and now weren't expecting such
Speaker 1: aggressive rate heights with the RBA is saying they weren't
Speaker 1: going to raise rates until four but that happened in two.
Speaker 1: So at the moment, we are expecting higher provision for
Speaker 1: doubtful debts on across banks across the board for a
Speaker 1: portion of the banks of portfolio, like the investment banks,
Speaker 1: who probably struggle a little bit though, right because of
Speaker 1: the trading losses and everything. Yeah, the investment banks are
Speaker 1: completely different story. They will struggle, and we've seen a
Speaker 1: lot of investors actually pull their full funds with the
Speaker 1: full their full funds and cut their losses and actually
Speaker 1: push into into their pushing into cash instead of keeping investing.
Speaker 1: So the investment banks we will see hit hard this term. Yes,
Speaker 1: you did mention the risk of defaulse bankruptcy is going forward.
Speaker 1: Were we have a number of zombie companies that have
Speaker 1: been sort of struggling along since the GFC. Is the
Speaker 1: next twelve months going to be a reckoning in your view?
Speaker 1: I definitely think it will be um. I will see
Speaker 1: a lot of companies who aren't set up for a
Speaker 1: recession going to be we could see a lot more defaults. Absolutely.
Speaker 1: And the company is like we've seen happen over the
Speaker 1: last week, they tanked in just one session. It's technology
Speaker 1: stock because they actually downgraded their outlook and forecast for
Speaker 1: the current terms. So as I said, the growth stocks
Speaker 1: and the technology stocks are the ones we could see
Speaker 1: defaulting over the over the cooming terms because of the
Speaker 1: fact that they rely so heavily on investment and john
Speaker 1: borrowings that are just increasingly unaffordable. What's a great contrarian
Speaker 1: call now? The contrarian call for US is it looking
Speaker 1: at the energy sector. A lot of their investments and
Speaker 1: markets around the world are looking at the piling into
Speaker 1: the woodsides of Santos is the global big names in
Speaker 1: the energy sector that have diversified portfolios. But for me
Speaker 1: and for us at Beldirect, we're looking specifically at concentrated
Speaker 1: stocks and companies like Boss Energy, Beach Energy that are
Speaker 1: capitalizing on the soaring energy market and the global energy crisis.
Speaker 1: Boss Energies uranium product projects are looking incredible at the moment,
Speaker 1: and especially with the likes of Japan turning back on
Speaker 1: nuclear power plants Graty. When we left off, you were
Speaker 1: talking about how you like energy stocks. We do have
Speaker 1: oil recently strong at the moment, where Texas sixty seven
Speaker 1: right now and as I mentioned, Beach Energy the only
Speaker 1: stock in the green here in Australia right now. But
Speaker 1: also in terms of energy, lithium is one of your
Speaker 1: favorite plays at the moment. How do you get exposure
Speaker 1: to that? Lithium is absolutely one of our favorite plays
Speaker 1: at the moment, and not so much in the lithium
Speaker 1: mining and exploration stocks. We've seen a shift of value
Speaker 1: into down the processing line through the production of lithium
Speaker 1: spot you means, so that's where the higher margins are
Speaker 1: and a lot of companies are capitalizing on this lately.
Speaker 1: We're seeing the investors are loving this trend as well.
Speaker 1: So the companies that are announcing that they are looking
Speaker 1: downstream options is where the value is and that's exactly
Speaker 1: what we're looking for when diversifying our portfolios into lithium
Speaker 1: stocks at the moment. So if we are looking at
Speaker 1: inflation and how sticky it is, does that give us
Speaker 1: an opportunity if if we can pick a part the
Speaker 1: different parts of inflation that will come down. For instance,
Speaker 1: a lot of the base metal is a lot of
Speaker 1: commodities have come down a lot, not so much oil,
Speaker 1: but other commodities have. But it's wages that are sticky.
Speaker 1: So is it beneficial to try to find companies that
Speaker 1: don't have as much in the way of labor cost
Speaker 1: and have much more in cost that will come down? Absolutely,
Speaker 1: And the companies that we're seeing announcing the COVID nineteen
Speaker 1: absenteeers and reduction and the cost reduction and reduction of
Speaker 1: every cost across the front of employment is exactly where
Speaker 1: we're seeing the value at the moment. So all of
Speaker 1: the miners who are looking for that actually brought processes
Speaker 1: back internal as opposed to the external offshore or other
Speaker 1: um contractors. That's where we're seeing the constroductions at the moment.
Speaker 1: That's where the value is going to lie moving forward.
Speaker 1: In terms of the consumer, Brian mentioned their wage wage
Speaker 1: prices are looking good, but costs continue to rise as well.
Speaker 1: How long can then humor remain resilient in this environment. Honestly,
Speaker 1: it's a that's a millionillar question. At the moment, everyone's
Speaker 1: wondering just how far they can go and how far
Speaker 1: wages can stay where they are or even growth at
Speaker 1: the moment. So at the moment, I think for the
Speaker 1: consumer's point of view, um, there's no real outlook. We
Speaker 1: can't like like markets around the world, there's no predictability,
Speaker 1: there's no certainty in any front. So I think at
Speaker 1: the moment it's a watching weight and it's actually a
Speaker 1: day by day basis at the moment. So what what
Speaker 1: else is out there in the area of kind of
Speaker 1: alternatives that might be beneficial for industrials to hear about.
Speaker 1: Are you looking at private equity or you know, some
Speaker 1: different types of real estate. Real estate stocks are ones
Speaker 1: that we're actually not looking out at the moment because
Speaker 1: they're being hit so hard. Every interest rate hike is
Speaker 1: seeing earnings of portfolio earnings off for each of the
Speaker 1: red stocks going down, So at the moment, that one's
Speaker 1: a little area we're not quite seeing any value in
Speaker 1: and for the for the short term and long term
Speaker 1: until what we see interest rates kind of plateau or stabilize. UM,
Speaker 1: we are seeing investors pulling away from consumer discretionary stocks,
Speaker 1: so those retail stocks that are hardest hitt and like
Speaker 1: the likes of Temple and Webster Nick Scali are down
Speaker 1: more than fifty percent year to date. So seeing those
Speaker 1: ones because we saw during COVID the peak peak profits
Speaker 1: for these companies because everyone wanted to read their homes,
Speaker 1: buy new furniture, and now these companies are actually so
Speaker 1: ravaged by supply chain issues it's incredible. So we're seeing
Speaker 1: blowouts of six to eight months on retail on the
Speaker 1: furniture that you're buying from them, as well as interest
Speaker 1: rates rising, so consumers not having as much to spend
Speaker 1: on these fronts. So retail stocks are the ones that
Speaker 1: are going to be hardest hits or read stocks. But
Speaker 1: we're seeing opportunity in gold as we as we anticipate
Speaker 1: the turnaround in the US dollar is imminent with the
Speaker 1: UK and Europe on the border of recession that will
Speaker 1: weigh on the US markets. So we're seeing, yeah, at
Speaker 1: the moment, gold miners and the sectors really undervalue their
Speaker 1: spot price of gold has maintained very resilient in a
Speaker 1: railia throughout the last few months, and so for the
Speaker 1: next short term to middle term, once the US dollar
Speaker 1: shows signs of turning around. That's when we see gold
Speaker 1: gold run in Australia. Yeah, and gold miners did perform
Speaker 1: particularly well in Australia last week. Today not so much
Speaker 1: the case, but very briefly golden Nozzy dollars. As you
Speaker 1: mentioned that it does look appealing, doesn't it. It looks
Speaker 1: very appealing. And we're looking at the likes of Degray Mining, Newcrest,
Speaker 1: Newcrest Mining, different different gold miners that are showing really
Speaker 1: really strong um not only bullion reserves but also outlook
Speaker 1: and they're actually all increasing their production outlooks as well.
Speaker 1: So some are jumping by nine percent and expecting a
Speaker 1: lot to go up. So we're really keeping a closer
Speaker 1: on the gold space at the moment. Yeah, the gold
Speaker 1: price right now US but two thousand, six hundred seventy
Speaker 1: and Nazzi dollars, So it does show you just what
Speaker 1: the currency disparity is. The Grady Wolf Market Analysts that
Speaker 1: Bell Direct. Thanks so much for joining us on the
Speaker 1: Bloomberg debreak Asia