EUROPE
Greece
- Last Thursday President Karolos Papoulias, heading the Greek delegation to the European Commission Summit in Brussels, delivered a letter from Prime Minister Antonis Samaras seeking adjustments to the country’s debt deal with its international creditors. [More] Samaras has previously said that he is seeking an extension of time (2 years) to achieve the economic milestones previously agreed in view of the country’s worsening recession and high unemployment. European Central Bank (ECB) executive board member Jörg Asmussen has responded that “if [Samaras] wants to change the mixture of the revenue and expenditure measures this can surely be discussed, but with respect to the key results and goals of the program to make Greece more competitive and to reach a debt-sustainability situation, I do not see room for change.” [More]
- Representatives of the European Commission, European Central Bank and International Monetary Fund (the troika) are scheduled to commence discussions with the Greek government in Athens this week.
- Antonis Samaras is likely to ask for direct bailout funding for its banks, seeking a similar deal to that arranged for Spain and Italy. [More] Yannis Stournaras has been appointed Finance Minister, replacing Vassilis Rapanos who resigned before taking office.
Lloyd notes: Funding for recapitalization of Greek banks is already included in bailout funding provided to the Greek government. Samaras may be seeking direct provision of funds to banks, reducing the increase in government debt associated with the bailout.
USA MARKET
Economy
Gerard Minack, Morgan Stanley’s Chief Strategist in Australia, considers that 2013 will be a year of recession in USA [More]. Gerard has been awarded best analyst for his correct bearish prediction for 2012.
Lloyd says: There are many internal trigger points for a downturn, including as key examples, concern over the dysfunction of Congress on economic and fiscal policy – to be tested after the Presidential election – in relation to, say, the statutory borrowing limit, the “fiscal cliff”, etc. And, of course, there are external trigger points such as Europe, China and Japan. The USA still has the waterlogged lifejacket of quantitative easing as a stimulus measure, but at some point Congress has to do its job.
- Public debt (28 Jun 2012): $15.781 trillion ($15,780,999,920,520.17), up $1bn from $15.780 trillion (21 Jun 2012). [More] The statutory borrowing limit is $16.4 trillion.
- Treasury yields:
- 30-year: 2.75%, down 1 basis point from 2.76%
- 10-year: 1.64%, down 4 basis points from 1.68%.
Gerard Minack and other analysts consider that the 10-year yield could fall to 1% by the end of 2012 [More] - 5-year: 0.72%, down 3 basis points from 0.75%
- Gold Futures: $1,604/oz up 2.36% from $1,567/oz last Friday.
- Oil Futures: $84.96/barrel up 6.52% from $79.76/barrel last Friday.
European Union exemptions on Iranian oil sanctions end this weekend. [More]
US market indices
Investors withdrew $51bn from investment funds in the first half of 2012 – probably in May-Jun 2012.
- S+P 500: 1,362 – up 2.02% from 1,335.
- DJIA: 12,880 – up 1.89% from 12,641.
- NASDAQ: 2,935 – up 1.49% from 2,892.
PORTFOLIO
Portfolio index: full year 30 Jun 2011 -> 30 Jun 2012
There were a few corrections in the first half year as analysts looked at the earnings of Amazon and Google. Amazon was criticised for its negligible margin on its Kindle Fire. Google was criticised for its costs.
Opening stock prices on 30 Jun 2011 were:
- Apple: $335.67
- Amazon: $204.49
- Google: $506.38
- Linkedin: $90.09
- VMware: $100.23
Index performance over the last full year is not so bad at USD valuation, and even better in AUD, rewarding the strategy of buying US stocks when the USD/AUD was high:
- Portfolio index (USD): 1.038 up 54.57% from 0.672 on 30 Jun 2011
- AUD 1.00 = USD 1.0191 down 5.10% from USD 1.0739 on 30 Jun 2011
- Portfolio index (AUD): 1.019 up 62.78% from 0.626 on 30 Jun 2011
Portfolio index: half year 30 Dec 2011 -> 30 Jun 2012
It seems like it’s been a tough half year, especially with such an awful May. Nevertheless our index did well due to a great Mar 2012 quarter.
Opening stock prices on 30 Dec 2011 were:
- Apple: $405.00
- Amazon: $173.10
- Google: $645.90
- Linkedin: $63.01
- VMware: $83.19
Index performance was:
- Portfolio index (USD): 1.038 up 35.21% from 0.768 on 30 Dec 2011
- AUD 1.00 = USD 1.0191 up 3.46% from USD 0.9850 on 30 Dec 2011
- Portfolio index (AUD): 1.019 up 29.56% from 0.780 on 30 Dec 2011
Portfolio index: this week 23 Jun 2012 -> 30 Jun 2012
Index performance shows some recovery from the European debt crisis, as the European Commission agreed a strategy for recapitalization of banks without increasing countries’ government debts.
- Portfolio index (USD): 1.038 up 1.96% from 1.018 last week
- AUD 1.00 = USD 1.0191 up 0.09% from USD 1.0181 last week
- Portfolio index (AUD): 1.019 up 1.90% from 1.000 last week
Apple
- Friday close: $584.00, up 0.33% from $582.10.
- Market value: $546bn up $2bn from $544bn
- P/E (historical): 14.24, up from 14.19
- P/E (1 year fwd): 12.13, down from 12.31
- Target (1 year): consensus $750, range $500 – $910.
Amazon
- Friday close: $228.25, up 2.74% from $222.16.
- Market value: $102.9bn, up $2.8bn from $100.1bn
- P/E (historical): 189, up from 184
- P/E (1 year fwd): 183, up from 182
- Target (1 year): consensus $250, range $210 – $285.
- Friday close: $580.07 up 1.50% from $571.48.
- Market value: $151bn, up $5bn from $146bn
- P/E (historical): 17.60, up from 17.34
- P/E (1 year fwd): 15.02, down from 15.09
- Target (1 year): consensus $750, range $662 – $850.
- Friday close: $106.27, down 0.54% from $106.85.
- Market value: $6.63bn, down $0.03bn from $6.66bn
- P/E (historical): 886, down from 890
- P/E (1 year fwd): 790, up from 639 The higher P/E suggests pessimism in the coming year’s earnings.
- Target (1 year): consensus $135, range $92 – $150.
- Analyst recommendations: More analysts rate LNKD as a HOLD than those who rate it as a BUY.
VMware
- Friday close: $91.04, down 0.55% from $92.45.
- Market value: $11.6bn, down $0.2bn from $11.8bn
- P/E (historical): 50.2, down from 50.8
- P/E (1 year fwd): 42.45, down from 44.84 The lower P/E suggests optimism in the coming year’s earnings.
- Target (1 year): consensus $125, range $100 – $135. Lower limit raised from $98.
CHIEF HAPPINESS OFFICERS
- Diogenes (cancer): 8/10 – OK with some bad spells
- Felix (kidney disease): 7/10 – permanent fixture in front of Anita’s heater
Our index was a little below the NASDAQ index, but ahead of the DJIA and S&P500 indices.
Worse than the major NYSE and NASDAQ indices today, but in the same ballpark as the tech sector index fall of 1.1%. The AUD index has returned to 1.000.
Our portfolio outperformed the S&P500, DJIA and NASDAQ market indices this week. The AUD valuation improved on that performance as the USD strengthened: