1) ‘WTF!’
My friend Stewart texted me this yesterday. He’d logged into his broking account and saw that his Ramsay Health Care shares were up 25% at the open.
The joys of a takeover offer!
There’s been a bit of commentary, naturally, about all this. I know diddly-squat about Ramsay or whether the offer is a good one.
But one line caught my eye in the report on the bid from the Australian Financial Review. If the deal goes through, the ‘takeover would rank as the biggest private equity-backed buyout of an Australian company’.
Y’all know these private equity firms like to use debt to finance these types of deals, usually.
Hmm. Are you thinking the same as me? We usually get these mega deals closer to the top of the market than the bottom.
Merger and acquisitions activity has been pretty hot for a while.
Put it like this, perhaps: it’s not a time to be blasé about your market exposure.
Of course, it all depends on your timeline, income needs, and tolerance for volatility.
If you’re happy to hold for years, then backing good, long-term prospects is fine by me.
The surest ground I know in the market is…well…land and property!
I told you a week or two ago I was getting interested in the office sector. I keep seeing evidence that the market is now looking beyond the immediate weakness in rents to the future.
And the market sees the office remaining relevant.
For example, what do we see just today?
Property behemoth Charter Hall is raising $75 million for a fund to go shopping in the commercial sector. Top of the desired list, apparently, is offices and logistics.
Secondly, office vacancies, at an aggregate level across the states, are falling.
But the real test is likely to come from a proposed sell-down of the two big Southern Cross Towers in Melbourne’s CBD.
Their existing owners are looking to cash out for around a $2 billion payday.
Obviously, anyone spending that kind of cash to get hold of them would need to be pretty confident they can rent them out! Watch this space.
The good news for you and me is that some of the real estate investment trusts (REITs) on the ASX are still trading cheap cheap cheap! You know the reason.
COVID kicked them between the legs and then added a squirrel grip for good measure.
Now the pain is easing.
We also have the additional factor of current global inflation driving anyone with a brain to protect their purchasing power via property as an inflation hedge.
There’s a potential ocean of money that could wash over the property market here.
Famous property investor Sam Zell turned himself into a multimillionaire back in the 1970s using the same playbook needed today.
I want you to think about Sam Zell here and the current repeat of the inflationary environment of 1974.
Zell explains in his autobiography:
‘Years later, people would ask me, “How did you know when and what to buy?” But all I basically did was create a massive arbitrage — a fixed-rate instrument in an inflationary environment.’
I described all this in much more detail in my latest issue of Australian Small-Cap Investigator.
It’s not just office space up for grabs at a discount. Property plays have been dumped in the last 6–9 months. I reckon it’s time to go shopping!
Do yourself a favour and pick up our latest reports here.
2) Someone else going shopping is my colleague Brian Chu over at Gold Stock Pro.
Aussie dollar gold is a barnstorming $2,600 an ounce…and the US futures keep pressing to break out to more than US$2,000 and signal the boom is back.
Aussie gold stocks have started to rally after their washout from August 2020 to about February this year.
With inflation roaring, Ukraine unresolved, and bonds currently getting routed, gold is a very reasonable proposition right now. Odds on it breaks higher from here.
Make sure to tune in to tomorrow’s The Daily Reckoning Australia for Brian’s latest update on the market.
3) Yesterday, I went to the LUME Van Gogh exhibition in the Melbourne CBD with my wife and eldest daughter. I’m not usually an art person. But I thoroughly enjoyed it. It’s certainly different to the usual museum experience.
Van Gogh’s work is brilliant but his life tragic. It all makes for a very evocative experience. My tip? Catch it if you can.
All the best,
 |
Callum Newman,
Editor, The Daily Reckoning Australia
PS: Don’t forget to check out our podcast here, too. Today, I’ll be chatting to my friend Selva about the lithium boom and the general rise of renewables. Until then!
