Good morning,

Last night the flight to the US dollar safety was the go..Commodities fell as punters pulled their money back to the ‘Good Old Treasuries’ and Dollar bills. News that Moody’s thought last week’s Euro summit did nothing to solve the problems whacked the markets. Would be ironic if the veto of David Cameron meant that the UK kept its AAA rating longer than the rest of Europe…strange days indeed..even the fear index, the VIX was that shouldn’t be so! Should it? Down to 25.7?Confused!

There is an issue which will start to become more visible as we head into 2012..its called Rehypothecation! It’s very complicated so I will try to make it really easy to understand…say you own a house and have mortgaged it to a bank..the bank can at anytime repossess that house if it really wants to..of course they don’t but they have the right to that bank then says the asset is ours effectively and then uses that asset as collateral for other loans..and so it goes a daisy chain..there are rules about what level of this pretend asset you can use as collateral but those clever Masters of the Universe in the UK have found some great little wheezes to get round those…the big issue is who owns what and where the money goes when it all goes pear I mention this as its becoming more obvious that this whole daisy chain approach has some issues..MF Global is the Pandora’s box in all this and if you look too hard you will see that the money seems to have gone up in a puff of smoke..much like the margin lenders who used clients funds as their collateral back in 2008! Anyway the upshot is this will start to get a lot more airplay in the months ahead.not in a good way I am afraid! watch out and now you know what this wonderful practice is all about and can dazzle your friends with your insights over the Xmas Turkey (we call that Europe now or Phil Hughes’ batting average).

Our market yesterday collapsed nearly as fast and certainly in tandem as the Australian Cricket batting order.(Can you tell I am a POM!) We started up around 65 and finished a lacklustre 49 points up on nothing volume again..the big day this week is the SPI expiry on Thursday and after that most serious players will shut down for the rest of the year. Books will be squared ,analysts will take a break and office parties will be in full swing..not that there is much to party about after this year!!

On the telly last night I was talking about Energy stocks especially in light of the move by Sinopec to take 10% more of the ORG Gladstone project. This is a positive for the sector as is the AZT/WHC merger! Gold, Iron ore and Copper may come and go but an increasingly wealthy Asian population does need to turn the lights on and charge their smartphones…I believe that the price of oil has potential to go much higher in 2012.It has spookily held up around $100 throughout this whole Euro depression scenario! Could it be that the Euro Zone matters less that the Asian zone..surely not!

My stock pick for 2012 in the energy sector is LNC, which I have long been a fan of and have been watching for a while..the market has punished them in recent months as their appears to be a less than focussed approach with assets bought in the US and even projects in Poland..what started out as a QLD Coal and Coal Gasification Company has changed and investors have been nervous..I believe that 2011 has been the year for Peter Bond and his team to sow the seeds for a significant energy company in 2/3 years time..I remain positive on this stock! Start your engines!


Hard to get excited about this market as enthusiasm is scarce at the moment but if it does pull back too far then there will be some bargains..needs to hold 4150 but at that level its worth looking at!


TME: Lists on the ASX


AU ABS Lending Finance for Oct

NAB Monthly Business Confidence (Nov)
US Industrial Production (Survey: 3.9%, Actual: 3.3%)