Three things I’m thinking about today…

1) Last week I flagged the investment banker saying the market might tank 20% sometime soon. That’s one scenario put on the table.

After a forecast like that, it helps to check in on what companies are doing. Are they expanding? Hunkering down? Hiring?

Here’s what I see. Buybacks seem to be all over the place!

Case in point is the non bank sector. I also touched on this sector last week talking about MA Financial ($MAF). MAF aren’t buying back stock, but they’re expanding.

It’s Resimac ($RMC) and Pepper Money ($PPM) I’m watching on the buybacks.

Here’s why I mention it. The non bank stocks were clobbered from their peak in 2021. They’ve been on the floor ever since.

I’ve watched them the whole time. In 2023 and 2024 they provisioned for higher bad debts and economic weakness.

That’s why the buybacks now seem notable. They’re comfortable using their cash. They’re not hunkering down.

By implication they think their share price is too cheap…and the economic outlook is getting better, and not worse.

Resimac also announced a special dividend this morning after a small asset sale.

I’m not suggesting you buy these two.

It’s just, “by their deeds ye shall know what they think of the general outlook”. It can’t be too bad, at least in their mind. That’s my read of it, anyway. 😊

2) That reminds me. On the Closing Bell last week I pointed out a fund manager profiled in the Fin Review.

This gent was saying that there are less and less ways to “play” housing on the ASX. That’s after a bunch of mergers and takeovers in recent years.

There could be even fewer shortly.

This morning the Street Talk column suggests that Brickworks ($BKW) is going to merge with Soul Patts.

These two have a somewhat complicated “cross holding” where they own shares in each other.

However, if they become one, as seems likely now, that’s another property related angle slightly diminished.

It does suggest the ones that remain might generate a premium because of this. We’ll see!

3) There’s a final point about non banks for today. They use “securitisation” to fund their loans.

I happen to be reading this book currently…

It profiles some of the big names in finance. One of those is Larry Fink.

Larry is the CEO of Black Rock and a gazillionaire.

Here’s why I bring him up today. Larry pioneered securitisation in the USA decades ago.

He makes the point that this helped housing become more affordable, when it began, because it lowered the cost of debt for the home buyer.

30 years later it ended in the US housing bubble and junk loans to unemployed people with no income. This rancid debt brought the global financial system down.

That wasn’t Larry’s fault. It’s just where the market ended up.

It made me wonder about artificial intelligence today. For sure this is going to help companies become more profitable and productive.

But how is it going to go bad, rogue or dangerous? Your guess is as good as mine. But market history is littered with frauds, scams and liars.

AI could be very dangerous with this mind. Stay vigilant.

Best wishes,

Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator

Murray’s Chart of the Day –
S&P 500 Weekly Chart

By Murray Dawes, Wednesday, 28 May 2025

The weekly chart is the only timeframe that remains bearish in the S&P 500.

The daily and monthly charts are pointing up.

The huge rally we have witnessed since the Trump tariff tantrum has taken prices right up into the sell zone of the whole correction.

Now it is decision time.

A continued rally over the next few weeks will flip the weekly trend to up and probably take prices above the all-time high.

You are a brave trader if you are willing to stay bearish once that happens.

But if we see a weekly close in the S&P 500 below 5725-5767 there is a chance we are on the cusp of the next leg down.

A close below that area will confirm a weekly sell pivot and also a close below the 10-week exponential moving average.

If there is another bout of selling to come it will probably start after that sell signal is confirmed.

I remain long, holding onto current open positions because the longer term trends remain up and there is a chance we see every timeframe turn positive soon.

But if we have a bad week, I will seriously consider lowering exposure for the time being.

Regards,

Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps