Good morning,

The old adage Sell in May and Go away is alive and well..there I have said it….the market hit an 8 month high yesterday..will struggle from here..that’s not to say that individual stocks will not do well but the headwinds are growing..technically 4370 needs to be broken and once again it failed…’Zombieland’ is starting to look worrying again and if you thought Greece was a mess, Spain looks far worse and let’s not even contemplate Italy!

There seems to be a view that the way to get the ECB to keep bailout funds coming is to keep pushing bond yields up until the system breaks..now everyone is wanting more say in bailout funds for the IMF ..and the US is not gonna tip any money in…the Germans are keeping mum and sitting pretty enjoying the export boom…this will not end well plus elections in Greece/ France to come..

The other issues that seem to be emerging is the worse than expected US economic numbers..Jobless claims seem to be all over the place and being revised more than my daughters Ancient History text book for HSC! This is not a good look..corporate earnings have been positive but economic woes continue so the US is in for a NEGATIVE BIAS..WE MAY OUTPERFORM but with markets where they are its time to get some liquidity..it’s going to be a long summer..Charlie you are too bullish!

Things that caught my eye!

1.UBS are letting clients tailor their computer trading models using ipads! Really its true…

2.The US Secret Service motto is ‘wheels up, rings off!!”

3.Craig Thomson has got to go!!Just gets worse and worse..how do these people sleep at night!

4.TLS disappointed with no capital management..HOWEVER with 28 cents locked in for the next two years in Divs ..what’s not to like!Continue to buy/hold for yield and safety..

5.France back in the ratings agency spotlight..rumours swirl of Downgrades but Lagarde comes to the rescue..Fitch wont downgrade they are French after all!

6.Fresh data showed sales of previously owned US homes in March unexpectedly fell for the third time in the last four months, and more Americans than forecast filed claims for jobless benefits.

7.Spanish Bond auction ok but not optimistic on this one..for these reasons …

Total Spanish banking loans are equal to 170% of Spanish GDP.

Troubled loans at Spanish Banks just hit an 18-year high of over 8%.

Spanish Banks are drawing a record €316.3 billion from the ECB (up from €169.2 billion in February).

Spanish household debt is equal to 90% of the country’s GDP: much higher than the EU average of 70% and roughly in line with that of the US which has been running a credit bubble for 30+ years.

8.Sad fact from Bank of America..why the US housing market is stuffed for some time…                  

From BofA: “The foreclosure inventory pipeline that must be cleared in the next few years is very large. Our mortgage strategists forecast that another 6.6 million homes will need to be liquidated over the next five years.”

 

However there are a couple of stocks that I continue to like…LNC and AMX..my little rave about BTR before Easter has paid off with the stock moving up from 1.30 to 1.57 yesterday..well done those that listened…

LNC have just done a deal with a Chinese company for their Gas to Liquids technology and have placed shares to them at 4.50!!Currently trading at 1.20…that’s a big difference..now even if the deal does not go through for whatever reason it still shows what is possible..I remain a fan of this one and am happy to pick up more shares at current levels for a move back towards 2.00 in the next six months.

Another one I like is AMX a West African Gold explorer..the company has been hit hard by delays ,political problems in Mali .lower grades and poor management..in fact so poor that it has put itself up for sale..they are sitting on 3m oz of Gold so it’s not that bad…Like this one for a move back to 1.50 on corporate moves! Somebody will surely buy it!

Thought for the day from Japan

Uncertainty has now hit Japan. In the last seven days, Origami bank has folded, Sumo Bank has gone belly up and Bonsai Bank has announced plans to cut some of its branches. Yesterday, it was also announced that Karaoke Bank will go up for sale and will likely go for a song, while shares in Kamikaze Bank were suspended today after they nose-dived. While Samurai Bank is soldiering on after sharp cutbacks, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at Sushi Bank, where it is feared that staff may get a raw deal.

Have a good weekend and we will miss you Greg Ham(Men at Work)..maybe I should stop listening to Nick Cave on the bus ..makes me too gloomy..but blimey he’s good!

Clarence

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