Grady Wulff on the Markets (Audio)

that's a fact. It seems like that's what's happening. We've seen a lot of losses here of late, but of course investors would also be trying to figure out with tenter so losses in these big benchmarks, whether or not enough has been discounted. Your thoughts on that. Absolutely. At the moment, we're seeing investors shifting their strategic positions and what their outlook is for investing moving forward. We're seeing a lot of investors throw, as you say, throwing in

the towel on growth stocks at the moment. The pandemic favorites with the likes of after Pace says it was zip on our pay later and technology stocks are being absolutely slammed this year and for good reason. At the moment, these kind of stocks are they're relying on increased fundings and borrowings with the cost of funding so high at the moment, the cost of borrowing so high, and very minimal outlook for these companies in low value at the

moment until they're in that mature stage of foundation. We can't see any outlook or value at the moment either, So investors are definitely piling out of those docks in favor of the safe havens like the banks, which we're expecting high profits from this quarter. UM without out later in the week. Yeah, let's talk a little bit about that. JP Morgan City, Morgan Stanley all out this week. What

sort of quarter are you anticipating? There were expect as we said, we're expecting higher profits and higher revenues for these for the banks, but we're also expecting to see increased provisions for doubtful debts around the world because a lot of consumers around the world and Australians investors overseas UM did take out big loans and we know the banks make their margins from a high short term lending and long term borrow sorry, short term borrowing, long term lending,

so that's how to make their margins. But we're expecting higher provisions for doubtful debts as we know investors have locked in. These consumers have locked in their unaffordable debts, well, debts they thought they could afford during the pandemic when the rates were record lows and now weren't expecting such aggressive rate heights with the RBA is saying they weren't going to raise rates until four but that happened in two.

So at the moment, we are expecting higher provision for doubtful debts on across banks across the board for a portion of the banks of portfolio, like the investment banks, who probably struggle a little bit though, right because of the trading losses and everything. Yeah, the investment banks are

completely different story. They will struggle, and we've seen a lot of investors actually pull their full funds with the full their full funds and cut their losses and actually push into into their pushing into cash instead of keeping investing. So the investment banks we will see hit hard this term. Yes, you did mention the risk of defaulse bankruptcy is going forward. Were we have a number of zombie companies that have

been sort of struggling along since the GFC. Is the next twelve months going to be a reckoning in your view? I definitely think it will be um. I will see a lot of companies who aren't set up for a recession going to be we could see a lot more defaults. Absolutely. And the company is like we've seen happen over the last week, they tanked in just one session. It's technology stock because they actually downgraded their outlook and forecast for

the current terms. So as I said, the growth stocks and the technology stocks are the ones we could see defaulting over the over the cooming terms because of the fact that they rely so heavily on investment and john borrowings that are just increasingly unaffordable. What's a great contrarian call now? The contrarian call for US is it looking

at the energy sector. A lot of their investments and markets around the world are looking at the piling into the woodsides of Santos is the global big names in the energy sector that have diversified portfolios. But for me and for us at Beldirect, we're looking specifically at concentrated stocks and companies like Boss Energy, Beach Energy that are capitalizing on the soaring energy market and the global energy crisis.

Boss Energies uranium product projects are looking incredible at the moment, and especially with the likes of Japan turning back on nuclear power plants Graty. When we left off, you were talking about how you like energy stocks. We do have oil recently strong at the moment, where Texas sixty seven right now and as I mentioned, Beach Energy the only stock in the green here in Australia right now. But also in terms of energy, lithium is one of your

favorite plays at the moment. How do you get exposure to that? Lithium is absolutely one of our favorite plays at the moment, and not so much in the lithium mining and exploration stocks. We've seen a shift of value into down the processing line through the production of lithium spot you means, so that's where the higher margins are and a lot of companies are capitalizing on this lately. We're seeing the investors are loving this trend as well.

So the companies that are announcing that they are looking downstream options is where the value is and that's exactly what we're looking for when diversifying our portfolios into lithium stocks at the moment. So if we are looking at inflation and how sticky it is, does that give us an opportunity if if we can pick a part the different parts of inflation that will come down. For instance, a lot of the base metal is a lot of commodities have come down a lot, not so much oil,

but other commodities have. But it's wages that are sticky. So is it beneficial to try to find companies that don't have as much in the way of labor cost and have much more in cost that will come down? Absolutely, And the companies that we're seeing announcing the COVID nineteen absenteeers and reduction and the cost reduction and reduction of every cost across the front of employment is exactly where

we're seeing the value at the moment. So all of the miners who are looking for that actually brought processes back internal as opposed to the external offshore or other um contractors. That's where we're seeing the constroductions at the moment. That's where the value is going to lie moving forward. In terms of the consumer, Brian mentioned their wage wage prices are looking good, but costs continue to rise as well. How long can then humor remain resilient in this environment. Honestly,

it's a that's a millionillar question. At the moment, everyone's wondering just how far they can go and how far wages can stay where they are or even growth at the moment. So at the moment, I think for the consumer's point of view, um, there's no real outlook. We can't like like markets around the world, there's no predictability, there's no certainty in any front. So I think at the moment it's a watching weight and it's actually a

day by day basis at the moment. So what what else is out there in the area of kind of alternatives that might be beneficial for industrials to hear about. Are you looking at private equity or you know, some different types of real estate. Real estate stocks are ones that we're actually not looking out at the moment because

they're being hit so hard. Every interest rate hike is seeing earnings of portfolio earnings off for each of the red stocks going down, So at the moment, that one's a little area we're not quite seeing any value in and for the for the short term and long term

until what we see interest rates kind of plateau or stabilize. UM, we are seeing investors pulling away from consumer discretionary stocks, so those retail stocks that are hardest hitt and like the likes of Temple and Webster Nick Scali are down more than fifty percent year to date. So seeing those ones because we saw during COVID the peak peak profits for these companies because everyone wanted to read their homes, buy new furniture, and now these companies are actually so

ravaged by supply chain issues it's incredible. So we're seeing blowouts of six to eight months on retail on the furniture that you're buying from them, as well as interest rates rising, so consumers not having as much to spend on these fronts. So retail stocks are the ones that are going to be hardest hits or read stocks. But we're seeing opportunity in gold as we as we anticipate the turnaround in the US dollar is imminent with the UK and Europe on the border of recession that will

weigh on the US markets. So we're seeing, yeah, at the moment, gold miners and the sectors really undervalue their spot price of gold has maintained very resilient in a railia throughout the last few months, and so for the next short term to middle term, once the US dollar shows signs of turning around. That's when we see gold gold run in Australia. Yeah, and gold miners did perform particularly well in Australia last week. Today not so much

the case, but very briefly golden Nozzy dollars. As you mentioned that it does look appealing, doesn't it. It looks very appealing. And we're looking at the likes of Degray Mining, Newcrest, Newcrest Mining, different different gold miners that are showing really really strong um not only bullion reserves but also outlook and they're actually all increasing their production outlooks as well. So some are jumping by nine percent and expecting a lot to go up. So we're really keeping a closer

on the gold space at the moment. Yeah, the gold price right now US but two thousand, six hundred seventy and Nazzi dollars, So it does show you just what the currency disparity is. The Grady Wolf Market Analysts that Bell Direct. Thanks so much for joining us on the Bloomberg debreak Asia