Call him a pessimist if you will, but the Punter can see no solid reason why the stock market should be as strong as it is.
True, millions of dollars in compulsory super contributions pour into the financial industry every week and they have to put it somewhere.
With interest rates so low, investors generally have been driven into the stock market by the need to get a higher yield.
But in the long run, the price of shares is set by the profits the companies can make, and the outlook is not great.
Drought, fires and floods have hit agriculture and tourism hard. Now the coronavirus is an added problem.
News that Nissan has halted production at one of their factories in Japan because their supply of components from China has dried up, suggests China's economy is being throttled by the restrictions imposed to curb the spread of the virus.
Partly for that reason, the Punter has been having a hard look at his Keytone Dairy shares (ASX code KTD). KTD's latest quarterly report was very upbeat. However, the company is banking on selling a significant proportion of its increased output to China, which may be why the shares have been sliding this month and on Friday hit a new low for the year of 33c. If they slide any further he will be quick to sell.
Meanwhile, he has decided to buy into the Murray River Organics share purchase plan.
The 3.843-for-1 offer means he is entitled to 195,993 new shares, at a cost of $2939.50. He is encouraged by the fact that the big end of town has taken up 100 per cent of the initial private placement, and the retail offer is fully underwritten.
The deal means MRG will represent roughly 20pc of his portfolio, which is a big risk. He hopes to sell some or all of his new shares at a modest profit when they return to the market next month.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.
