Stay Short BOQ

Posted on | by Todd | Leave a Comment on Stay Short BOQ

In a recent analyst review, the forward pricing on BoQ has been gauged at 12% overvalued and  adjusted lower from current levels to $11.50 over the medium-term

The note focused on the bank’s balance sheet being skewed towards residential mortgages  and that a rise in bad debts will put downside pressure on operating margins.

We agree with the initial downside target of $11.50 and see scope for some range extension into the low $11.00 handle.

Bank of Queensland 

 

 

ALGO Update: Sell Pilbara Minerals

Posted on | by Todd | Leave a Comment on ALGO Update: Sell Pilbara Minerals

The ALGO engine triggered a sell signal in Pilbara Minerals at 56 cents on the ASX close on Friday.

Shares of the WA-based lithium producer jumped over 40% last week following a report that China plans to ban new petrol and diesel engines by 2030.

We don’t believe this timetable is realistic and that some form of clarification of the policy is likely to be forthcoming from the Chinese government.

In the meantime, investors holding shares in PLS should look to take profits on long positions and look to re-enter back in the 40 cent area.

Pilbara Minerals

 

 

 

FOMC Preview: It’s All About The Balance Sheet

Posted on | by Todd | Leave a Comment on FOMC Preview: It’s All About The Balance Sheet

This coming Tuesday and Wednesday, the FOMC will meet to discuss the next move in US monetary policy.

Over the last several months, it’s been well-telegraphed that this meeting will focus on unwinding QE and shrinking their balance sheet. The amounts and the mechanics have already been announced. Now it’s just a matter of announcing a starting date.

US financial markets have been brushing off the Fed and have done the opposite of what the Fed has set out to accomplish.

The Fed wants to tighten US financial conditions. It’s worried about asset prices and that these inflated assets, which are used as collateral by the banks, pose a danger to financial stability.

The FED has mentioned several inflated asset classes by name, including equity prices and commercial real estate, which backs $4 trillion in loans heavily concentrated at regional banks.

The FED has raised rates four times since December 2015, including three times over the past nine months. As the chart below illustrates, the relationship between the DOW Jones Index and the FED’s balance sheet is highly correlated.

As such, the FED’s decision could be a prime driver of US equities next week.