There were three really big issues that swirled through the share market this week.
Most recent was investment legend Charlie Munger’s claim that the current investment environment was “even crazier’’ than the dot com era and the boom in cryptocurrencies was “insane.”
Second was the belated admission from US Federal Reserve chairman Jerome Powell that the current boost in inflation in the US was no longer “transitory’’ and the word should now be retired.
And thirdly, there is the continued uncertainty around the arrival of the Omicron variant of COVID-19, which is already interrupting world travel and could potentially have a severe effect on the world economy.
Uncertainty on the rise
Taken together the influences perhaps explain why we have been through such a topsy turvy week, with uncertainty everywhere you look around valuations, future interest rates and the effect of the latest COVID-19 variant.
Charlie Munger could well be right and valuations might be stretched but with inflation rising and interest rates following, maybe that’s a logical outcome.
As for crypto, Charlie Munger and his Berkshire Hathaway colleague Warren Buffet haven’t met a technology company they like – with the notable exception of Apple – so perhaps they are not the best judges of cutting-edge developments – or maybe their long observation of financial markets gives them a unique perspective.
Either conclusion could be supported, although Charlie Munger’s strong support for renewable energy shows that at least one big investor is happy to support moves towards carbon neutrality.
Science will take a couple of weeks to produce some answers
As for the latest COVID-19 variant, there is little to be gained worrying about it until the science is back in the next couple of weeks, with a wide range of scenarios possible from the benign “highly infectious but much less dangerous’’ through to a vaccine dodging economic destroyer possible.
On the Australian market the volatility shone through in a 0.52% fall for the week which was tempered by a 0.22% rise on Friday and a rise of almost 10% for this year.
Banks and energy stocks did most of the positive heavy lifting on Friday although heavy losses by telco TPG pulled in the opposite direction.
David Teoh share sale hurts TPG shares
TPG’s (ASX: TPG) founder and former chairman David Teoh was the catalyst for the weakness as news hit that he was selling 20% of his shares, around 53 million of them – the maximum allowed under the terms of the 2020 merger of TPG and Vodafone Australia.
The 66-year-old billionaire’s decision to start cashing out his shares follows his decision to stand down from the board eight months ago and creates a large share overhang with possibly another four big sales to come if he has decided to exit the share register entirely.
TPG’s share price dropped 8.61% to $6.05.
There was some good news of course, with the energy sector up 1.6% and financials rising 1%.
Investment company Washington H. Soul Pattinson (ASX: SOL) also had one of the best days since it merged with investment company Milton, with its shares rising 3.3%.
Small cap stock action
The Small Ords index fell 1.9% for the week to close on 3380.6 points.
Small cap companies making headlines this week were:
Credit Clear (ASX: CCR)
The New Zealand market has opened up for Credit Clear after its long-term client Prospa Group tasked the company with an enhanced deployment of its accounts receivable and customer relationships platform in the country.
Credit Clear’s platform is expected to support online SME lender Prospa’s growth in New Zealand.
“Credit Clear’s platform supports our clients’ expansion goals into new markets and also presents the opportunity for our business to continue to scale globally,” Credit Clear chief executive officer David Hentschke said.
QMines (ASX: QML)
A resource upgrade was unveiled this week for QMines’ Mt Chalmers copper-gold project northeast of Rockhampton in Queensland.
The new resource totals 5.8Mt at 1.7% copper equivalent for 101,000t of contained copper equivalent.
This estimate is a 38% increase on the previous figure, with confidence also improving with 78% of the resource classified as measured and indicated.
Drilling is ongoing at the project with a third resource upgrade scheduled for the first half of next year.
Crowd Media (ASX: CM8)
Within a rapidly growing conversational AI market, Crowd Media’s new chief executive officer Idan Schmorak has planned the commercial launch of the company’s talking head system in the first quarter of next year.
Mr Schmorak has also said there will be other implementations throughout 2022 to open up further revenue streams, with deals already under negotiation.
Additionally, a proof-of-concept digital human version of a health care provider that can interact with patients is also expected to be launched early next year under a partnership with South African company PangeaMed.
E79 Gold Mines (ASX: E79)
Recent ASX debutant E79 Gold Mines has begun a maiden aircore drilling program at its Laverton South gold project in Western Australia.
The 25,000m program will focus on high priority walk up drill targets within the Pinjin JV tenement which E79 is farming into from St Barbara.
Drilling is anticipated to continue into February with assays anticipated by April.
Investigator Resources (ASX: IVR)
Aspiring silver producer Investigator Resources has revealed an “outstanding” prefeasibility study for its flagship Paris project in South Australia.
The study is based on a resource of 18.9Mt at 88g/t silver and 0.52% lead for 53.1Moz silver and 97,600t lead.
It has found Paris to be “technically sound” and “financially robust” with estimated annual pre-tax cash flow between $86 million and $97 million.
iTech Minerals (ASX: ITM)
iTech Minerals has identified further rare earth element (REE) potential at its Eyre Peninsula project after reviewing more historical drilling data.
A review of Archer Materials previous drilling at the Salt Creek prospect within the project found “significant enrichment” of elements neodymium and praesidium with an average grade of 23%, and “desirable” heavy REE oxides (about 39%).
These REE minerals attract premium prices with neodymium and praesidium, particularly, deemed critical to the renewable energy and electric vehicles.
The week ahead
We may be nearing the end of the year but there is still plenty of action to look forward to.
The Reserve Bank has its final meeting for the year.
While there is little chance of a change in monetary policy after the recent decision to stop targeting the 0.1% rate on government bonds, that decision has resulted in a rising tide of particularly fixed rate housing loans as banks try to maintain margins above bond yields.
Any commentary around bond yields and purchases would obviously be pivotal for interest rates.
Other local things to watch out for include jobs and wages figures, job advertisements, household spending intentions and property prices.
Internationally, inflation numbers will be the focus with both the US and China releasing figures that are sure to be keenly awaited.
Inflation is already making itself felt for businesses with small business optimism in the US falling to a 7-month low in October as 53% of business owners reported rising prices and rising wages to attract staff and combat labour shortages.
US unemployment numbers and Chinese international trade figures will also be interesting but it is the inflation numbers that will be the real market movers, especially with the US Federal Reserve following that up with a mid-December policy meeting.