Michael Marcus is a famous trader who featured in thefirst Market Wizards book by Jack Schwager. He said that markets can be traded successfully using threethings: fundamentals, technical analysis & market tone. Right now, the fundamentals for the US stockmarket are unequivocally BEARISH as the US is in recession, US consumer confidence has plunged, aglobal tariff war is escalating, and US earnings are set to fall, while inflation is on its way higher. Thetechnical picture is clearly BEARISH (please refer to last weeks 12 charts of large US financials andtechnology stocks – all breaking down on the charts = bearish); and finally, market tone. The tone isdefinitely BEARISH as US institutions have piled into the US stock market and remain extremely LONGand have been caught Bullish at exactly the wrong time. Half-hearted bear market rallies with noconviction are a massive clue as to the underlying condition of the stock market. The tone is poor andbearish. Investment Portfolios should engage in HEDGING market risk, cashing up 50% of EquityPortfolios, buying BEARISH ETFs & preparing for a serious psychotic Bear who takes no prisoners.In an ominous sign for the market James Hardie’s (JHX) share price plunged 10% after announcing atakeover of US group AZEK for $8.75bn in a cash & scrip deal. Paying up for assets in a BEAR MARKET canbe one of the quickest ways to destroy shareholder value. 6X Book Value & a P/E of 48X, really?C K Hutchison (0001.HK) released results which were a bit soft, and the stock sold off towards the $43area. A Barron’s article highlighted the exceptional fundamental value in the stock. Another great buyingopportunity has presented itself. Investors need to follow through with conviction. If you don’t bet youcan’t win.Meituan (3690.HK) reported results & rapid revenue growth (see International Section below) – thestock remains one of our Hong Kong picks, and both Citi’s research plus additional colour is presentedwith a very interesting article by KrASIA [see International Section below]. Meituan has a high Return onEquity (ROE) of 25%, is growing revenues at 20% p.a., is expected to grow EPS at 20% p.a. for the nextfew years and trades for a very reasonable P/E of 16X (2026E). The Balance Sheet is strong with Net Cashof HK$39 per share (based on fully diluted ordinary shares on issue).The Citi analyst updated the BYD (1211.HK) research – another of our Hong Kong picks - & remainspositive on the stock with an expected total return of 70% [see below]. TRUMPS 25% tariffs (announcedtoday) on US car imports are partly aimed at stopping BYD from succeeding in Tesla’s back yard.In Australia, the 2024/2025 BUDGET was announced and a sea of red ink, deficits as far as the eye cansee, with massive blow-outs in the PUBLIC DEBT burden were forecast. John Kehoe’s analysis below isspot on [see RBA WATCH & AUSTRALIAN BUDGET section below]. This is pork barrelling and fiscalirresponsibility at its worst.
