Good morning,

Happy Star Wars Day-May the Fourth be with you!

Last night we saw markets ease across a broad range of risk assets. Once again economic news from the US was disappointing and below expectations and was enough to send markets lower. Chinese data also showed a slowing and of course Europe kept its rates on hold at 1%..Spain auctioned some more bonds..better than expected take up but worse than expected rate…no relief there…so I remain of the view that we will see some more downside..the sell in May strategy is my view but as one adviser pointed out to me yesterday there are still 26 days left in May so timing is everything! I believe that we have seen the most gains in the market until we hit the Spring here.

The landscape in Europe is changing if the Greek elections go badly for the ruling party we could be back to the defaulting on debt options and with France about to kick “Teacozy” out and install the “Hollandia” Line then that just makes it even more fun!(Memo to self need a better nickname for Hollandie,maybe the sauce!)

Cost blowouts in large resource projects are beginning to bite. The head of Rio was in town talking to our Julia about the cost of doing business and advancing projects in Australia. A and we still have to see how the mining tax will pan out (sorry no pun intended!) I have a theory on the tax which although will be only mildly negative for their bottom lines, it has set a precedent. Other Governments around the World will be looking and in some case have acted on Mining companies and ensuring more of the profits stays in the country. It’s an experiment that they all want to emulate! Maybe the halcyon days for Mining contractors and FIFO workers is starting to come to an end as resource companies cancel projects and cut back on expansion plans…They tend to do that quite quickly in some cases..see story below.Time to cut back on exposure to contractors perhaps…

BG Group’s Gladstone coal-seam gas export project has been hit by a $US5 billion ($A4.8 billion) cost blowout that the mining sector says illustrates the rising cost of doing business in Australia, due largely to the strong Australian dollar, rising local costs and growing regulatory hurdles, according to a report by The Australian

Big Themes

The disconnect between US Treasuries and Equities continues and must close soon! That means lower equity prices I believe and Treasuries going back up..

Warren Buffet underperforms now for the third year!!

Berkshire Hathaway shareholders missed out on better returns from the Standard & Poor’s 500 Index by sticking with Chairman Warren Buffett after each of his last three annual meetings.

 

Things to make you go mmm!

1.The US service sector grew slower than expected with more jobs numbers tonight with Non Farm Payrolls.

2.Big political events in Europe this weekend with French and Greek elections..should keep the markets on their toes.

3.Oil hit hard last night as were gold and copper..Risk on Risk off..go Myagi!

4.Economist expect Friday’s jobs report to show the economy created a meagre 162,000 jobs last month, while the unemployment rate was stuck at 8.2 per cent.

5.SPI down 11 but expect it to slip slightly more…again in quiet trade ahead of next weeks budget-Defence spending got a whack but I am puzzled why we need 18 submarines!

6.Banks once again flex their muscles but the margins are being squeezed that’s for sure..I feel another round of job cuts on the way and more outsourcing!

7.Facebook valuing itself at $96bn ….like!…Dislike!!!

8.Aussie dollar slipping below 1.03 so expect parity soon…lock in those Ski Holiday prices whilst you can

9.FA Cup final this weekend. Go Chelsea..promise I will only mention them again on Monday if they beat Liverpool!My wife thinks I talk too much about Football.Can there be such a thing..not sure!

10.Beer drinking in Australia has plunged to a 65 year low..I know I am doing my bit so must be everyone else slacking!

Have a good weekend and May the Fourth be with you!

Clarence

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