Back This Cycle All the Way  

• A good win for a Cycles, Trends & Forecasts reader
• Spain’s symbolic move
• Plus, a low hassle approach to money management

Callum Newman

Dear Reader,

$15,000. That’s how much a subscriber made in four months based off a January recommendation of mine in Cycles, Trends & Forecasts. I told them to take the profit yesterday.

I don’t point this out to brag. It’s only to emphasise that the 18-year land cycle Catherine Cashmore and I talk about not only applies to the property market.

It can guide your share investments as well!  

Take the last four months. They have been tough going for a lot of stocks. Afterpay hit 50% down from its 2021 high.

The ‘WAAX’ stocks have each lost at least 20%. And we saw a company called EML Payments cop a 40% pasting this week.

Kogan shareholders are in for a tough day today after the company downgraded its profit outlook.

The current Cycles, Trends & Forecasts buy list has so far managed to avoid this type of carnage. The worst position is -4.8% from the 10 remaining stocks. The highest is 190%-plus.

That’s not to say every position is a slam dunk winner like the one I mention above.

But on the whole I am very happy with it. It’s designed to deliver capital growth and income over the upswing of the property cycle. It’s not for riverboat gamblers and crypto speculators.

Subscribers are about to haul in a chunk of dividends come the end of the financial year too.

The cycle is particularly helpful on a day like Wednesday too. I’m sure you know that the ASX copped a flogging on the day — the worst session since February.

However, those type of days can provide excellent buying opportunities for the long-term positions we have.

For example, two of my recommended REITs pay a 6% yield and are currently trading under their ‘Net Tangible Assets’.

Lower prices, from volatility like Wednesday, are a wonderful invitation to accumulate more.

But you do need conviction. That only comes from understanding the drivers behind the cycle.  

In general, this is why I have started to avoid all energy-related stocks. I’m talking oil, gas, energy retailers, uranium — the lot of it. I have no idea where any of it goes currently.

For example, the Spanish government has come out and said it’s banning oil and gas exploration in the country.

This is more symbolic than anything because Spain doesn’t produce a lot of fossil fuels.

But all the public institutions are also to divest of any holdings in companies involved in the production, refining, and processing of fossil fuels.

We can see a similar dynamic in play with a royalty stream up for grabs from Whitehaven Coal’s Narrabri mine. The Australian Financial Review reports that its current owner — a British company — gets 1% of revenue but is considering selling. Would you be game enough to buy it considering the environmental pressures against coal?

One of Whitehaven’s partners in another coal mine wants to divest to reduce its carbon exposure.

These are no longer simply financial considerations. It’s all messy and worrisome for me.

However, I recently finished a book called The World for Sale. It’s about the rise of great commodity trading houses from around 1950 to now.

These guys made billions of dollars off oil, coal, grains, you name it. One of the ways they did that was to buy and sell to anyone.

It didn’t matter if it was an African dictator or a war zone or political poison. If there was a dollar in it, they’d do it.

One of the ways that could happen was they were private. They only had to answer to their own conscience, not a bunch of shareholders.

I think the coal business may look something like that soon. I’m not saying it’s immoral to work in coal, by the way.

All I’m saying is I think the public pressure against the industry will be too much hassle for public firms. 

Private commodity houses can take it over and send it to whoever wants it — which is still a lot of people around the world.

I don’t want the hassle of it, so don’t bother looking in that sector.

For my money, and my subscribers, it’s the real estate cycle all the way.

Regards,

Callum Newman,
Editor, The Daily Reckoning Australia