WEBVTT - Grady Wulff on the Markets (Audio)

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<v Speaker 1>Right here, we are seven and a half minutes past

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<v Speaker 1>the hour. Let's get to our guest. It's Grady Wolf,

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<v Speaker 1>market analyst at Bell Direct, to take a look at

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<v Speaker 1>the markets. You know, I've been saying this morning that

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<v Speaker 1>investors are kind of throwing in the towel on a

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<v Speaker 1>central bank pivot here. Uh, And I'm not sure that

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<v Speaker 1>that's a fact. It seems like that's what's happening. We've

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<v Speaker 1>seen a lot of losses here of late, but of

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<v Speaker 1>course investors would also be trying to figure out with

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<v Speaker 1>tenter so losses in these big benchmarks, whether or not

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<v Speaker 1>enough has been discounted. Your thoughts on that. Absolutely. At

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<v Speaker 1>the moment, we're seeing investors shifting their strategic positions and

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<v Speaker 1>what their outlook is for investing moving forward. We're seeing

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<v Speaker 1>a lot of investors throw, as you say, throwing in

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<v Speaker 1>the towel on growth stocks at the moment. The pandemic

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<v Speaker 1>favorites with the likes of after Pace says it was

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<v Speaker 1>zip on our pay later and technology stocks are being

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<v Speaker 1>absolutely slammed this year and for good reason. At the moment,

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<v Speaker 1>these kind of stocks are they're relying on increased fundings

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<v Speaker 1>and borrowings with the cost of funding so high at

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<v Speaker 1>the moment, the cost of borrowing so high, and very

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<v Speaker 1>minimal outlook for these companies in low value at the

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<v Speaker 1>moment until they're in that mature stage of foundation. We

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<v Speaker 1>can't see any outlook or value at the moment either,

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<v Speaker 1>So investors are definitely piling out of those docks in

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<v Speaker 1>favor of the safe havens like the banks, which we're

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<v Speaker 1>expecting high profits from this quarter. UM without out later

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<v Speaker 1>in the week. Yeah, let's talk a little bit about that.

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<v Speaker 1>JP Morgan City, Morgan Stanley all out this week. What

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<v Speaker 1>sort of quarter are you anticipating? There were expect as

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<v Speaker 1>we said, we're expecting higher profits and higher revenues for

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<v Speaker 1>these for the banks, but we're also expecting to see

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<v Speaker 1>increased provisions for doubtful debts around the world because a

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<v Speaker 1>lot of consumers around the world and Australians investors overseas

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<v Speaker 1>UM did take out big loans and we know the

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<v Speaker 1>banks make their margins from a high short term lending

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<v Speaker 1>and long term borrow sorry, short term borrowing, long term lending,

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<v Speaker 1>so that's how to make their margins. But we're expecting

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<v Speaker 1>higher provisions for doubtful debts as we know investors have

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<v Speaker 1>locked in. These consumers have locked in their unaffordable debts, well,

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<v Speaker 1>debts they thought they could afford during the pandemic when

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<v Speaker 1>the rates were record lows and now weren't expecting such

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<v Speaker 1>aggressive rate heights with the RBA is saying they weren't

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<v Speaker 1>going to raise rates until four but that happened in two.

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<v Speaker 1>So at the moment, we are expecting higher provision for

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<v Speaker 1>doubtful debts on across banks across the board for a

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<v Speaker 1>portion of the banks of portfolio, like the investment banks,

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<v Speaker 1>who probably struggle a little bit though, right because of

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<v Speaker 1>the trading losses and everything. Yeah, the investment banks are

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<v Speaker 1>completely different story. They will struggle, and we've seen a

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<v Speaker 1>lot of investors actually pull their full funds with the

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<v Speaker 1>full their full funds and cut their losses and actually

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<v Speaker 1>push into into their pushing into cash instead of keeping investing.

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<v Speaker 1>So the investment banks we will see hit hard this term. Yes,

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<v Speaker 1>you did mention the risk of defaulse bankruptcy is going forward.

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<v Speaker 1>Were we have a number of zombie companies that have

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<v Speaker 1>been sort of struggling along since the GFC. Is the

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<v Speaker 1>next twelve months going to be a reckoning in your view?

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<v Speaker 1>I definitely think it will be um. I will see

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<v Speaker 1>a lot of companies who aren't set up for a

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<v Speaker 1>recession going to be we could see a lot more defaults. Absolutely.

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<v Speaker 1>And the company is like we've seen happen over the

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<v Speaker 1>last week, they tanked in just one session. It's technology

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<v Speaker 1>stock because they actually downgraded their outlook and forecast for

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<v Speaker 1>the current terms. So as I said, the growth stocks

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<v Speaker 1>and the technology stocks are the ones we could see

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<v Speaker 1>defaulting over the over the cooming terms because of the

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<v Speaker 1>fact that they rely so heavily on investment and john

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<v Speaker 1>borrowings that are just increasingly unaffordable. What's a great contrarian

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<v Speaker 1>call now? The contrarian call for US is it looking

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<v Speaker 1>at the energy sector. A lot of their investments and

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<v Speaker 1>markets around the world are looking at the piling into

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<v Speaker 1>the woodsides of Santos is the global big names in

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<v Speaker 1>the energy sector that have diversified portfolios. But for me

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<v Speaker 1>and for us at Beldirect, we're looking specifically at concentrated

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<v Speaker 1>stocks and companies like Boss Energy, Beach Energy that are

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<v Speaker 1>capitalizing on the soaring energy market and the global energy crisis.

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<v Speaker 1>Boss Energies uranium product projects are looking incredible at the moment,

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<v Speaker 1>and especially with the likes of Japan turning back on

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<v Speaker 1>nuclear power plants Graty. When we left off, you were

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<v Speaker 1>talking about how you like energy stocks. We do have

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<v Speaker 1>oil recently strong at the moment, where Texas sixty seven

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<v Speaker 1>right now and as I mentioned, Beach Energy the only

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<v Speaker 1>stock in the green here in Australia right now. But

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<v Speaker 1>also in terms of energy, lithium is one of your

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<v Speaker 1>favorite plays at the moment. How do you get exposure

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<v Speaker 1>to that? Lithium is absolutely one of our favorite plays

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<v Speaker 1>at the moment, and not so much in the lithium

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<v Speaker 1>mining and exploration stocks. We've seen a shift of value

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<v Speaker 1>into down the processing line through the production of lithium

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<v Speaker 1>spot you means, so that's where the higher margins are

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<v Speaker 1>and a lot of companies are capitalizing on this lately.

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<v Speaker 1>We're seeing the investors are loving this trend as well.

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<v Speaker 1>So the companies that are announcing that they are looking

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<v Speaker 1>downstream options is where the value is and that's exactly

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<v Speaker 1>what we're looking for when diversifying our portfolios into lithium

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<v Speaker 1>stocks at the moment. So if we are looking at

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<v Speaker 1>inflation and how sticky it is, does that give us

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<v Speaker 1>an opportunity if if we can pick a part the

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<v Speaker 1>different parts of inflation that will come down. For instance,

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<v Speaker 1>a lot of the base metal is a lot of

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<v Speaker 1>commodities have come down a lot, not so much oil,

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<v Speaker 1>but other commodities have. But it's wages that are sticky.

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<v Speaker 1>So is it beneficial to try to find companies that

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<v Speaker 1>don't have as much in the way of labor cost

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<v Speaker 1>and have much more in cost that will come down? Absolutely,

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<v Speaker 1>And the companies that we're seeing announcing the COVID nineteen

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<v Speaker 1>absenteeers and reduction and the cost reduction and reduction of

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<v Speaker 1>every cost across the front of employment is exactly where

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<v Speaker 1>we're seeing the value at the moment. So all of

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<v Speaker 1>the miners who are looking for that actually brought processes

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<v Speaker 1>back internal as opposed to the external offshore or other

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<v Speaker 1>um contractors. That's where we're seeing the constroductions at the moment.

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<v Speaker 1>That's where the value is going to lie moving forward.

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<v Speaker 1>In terms of the consumer, Brian mentioned their wage wage

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<v Speaker 1>prices are looking good, but costs continue to rise as well.

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<v Speaker 1>How long can then humor remain resilient in this environment. Honestly,

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<v Speaker 1>it's a that's a millionillar question. At the moment, everyone's

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<v Speaker 1>wondering just how far they can go and how far

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<v Speaker 1>wages can stay where they are or even growth at

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<v Speaker 1>the moment. So at the moment, I think for the

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<v Speaker 1>consumer's point of view, um, there's no real outlook. We

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<v Speaker 1>can't like like markets around the world, there's no predictability,

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<v Speaker 1>there's no certainty in any front. So I think at

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<v Speaker 1>the moment it's a watching weight and it's actually a

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<v Speaker 1>day by day basis at the moment. So what what

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<v Speaker 1>else is out there in the area of kind of

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<v Speaker 1>alternatives that might be beneficial for industrials to hear about.

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<v Speaker 1>Are you looking at private equity or you know, some

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<v Speaker 1>different types of real estate. Real estate stocks are ones

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<v Speaker 1>that we're actually not looking out at the moment because

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<v Speaker 1>they're being hit so hard. Every interest rate hike is

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<v Speaker 1>seeing earnings of portfolio earnings off for each of the

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<v Speaker 1>red stocks going down, So at the moment, that one's

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<v Speaker 1>a little area we're not quite seeing any value in

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<v Speaker 1>and for the for the short term and long term

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<v Speaker 1>until what we see interest rates kind of plateau or stabilize. UM,

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<v Speaker 1>we are seeing investors pulling away from consumer discretionary stocks,

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<v Speaker 1>so those retail stocks that are hardest hitt and like

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<v Speaker 1>the likes of Temple and Webster Nick Scali are down

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<v Speaker 1>more than fifty percent year to date. So seeing those

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<v Speaker 1>ones because we saw during COVID the peak peak profits

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<v Speaker 1>for these companies because everyone wanted to read their homes,

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<v Speaker 1>buy new furniture, and now these companies are actually so

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<v Speaker 1>ravaged by supply chain issues it's incredible. So we're seeing

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<v Speaker 1>blowouts of six to eight months on retail on the

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<v Speaker 1>furniture that you're buying from them, as well as interest

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<v Speaker 1>rates rising, so consumers not having as much to spend

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<v Speaker 1>on these fronts. So retail stocks are the ones that

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<v Speaker 1>are going to be hardest hits or read stocks. But

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<v Speaker 1>we're seeing opportunity in gold as we as we anticipate

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<v Speaker 1>the turnaround in the US dollar is imminent with the

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<v Speaker 1>UK and Europe on the border of recession that will

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<v Speaker 1>weigh on the US markets. So we're seeing, yeah, at

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<v Speaker 1>the moment, gold miners and the sectors really undervalue their

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<v Speaker 1>spot price of gold has maintained very resilient in a

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<v Speaker 1>railia throughout the last few months, and so for the

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<v Speaker 1>next short term to middle term, once the US dollar

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<v Speaker 1>shows signs of turning around. That's when we see gold

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<v Speaker 1>gold run in Australia. Yeah, and gold miners did perform

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<v Speaker 1>particularly well in Australia last week. Today not so much

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<v Speaker 1>the case, but very briefly golden Nozzy dollars. As you

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<v Speaker 1>mentioned that it does look appealing, doesn't it. It looks

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<v Speaker 1>very appealing. And we're looking at the likes of Degray Mining, Newcrest,

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<v Speaker 1>Newcrest Mining, different different gold miners that are showing really

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<v Speaker 1>really strong um not only bullion reserves but also outlook

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<v Speaker 1>and they're actually all increasing their production outlooks as well.

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<v Speaker 1>So some are jumping by nine percent and expecting a

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<v Speaker 1>lot to go up. So we're really keeping a closer

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<v Speaker 1>on the gold space at the moment. Yeah, the gold

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<v Speaker 1>price right now US but two thousand, six hundred seventy

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<v Speaker 1>and Nazzi dollars, So it does show you just what

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<v Speaker 1>the currency disparity is. The Grady Wolf Market Analysts that

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<v Speaker 1>Bell Direct. Thanks so much for joining us on the

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<v Speaker 1>Bloomberg debreak Asia